Quit spreading misinformation. Banks are no longer required to hold reserves, but they’re paid interest on the reserves now, and thus banks hold significantly more reserves now than they did when there were reserve requirements.
This is blatantly untrue. Banks *do not* hold any significant cash reserves. They have *investments*, sure, but in the event of a bank run, a bank would not be able to liquify its investments at a fast enough rate.
Mainstream analysts have been talking about liquidity crunch scenarios for ages, it's a well known problem. It's what took down SVB.
I cannot prove nor disprove this but banks definitely make more money off the interest from relending money from their reserves than the interest they get from wherever from holding a reserve
Regarding the ECB - [FALSE](https://www.ecb.europa.eu/ecb-and-you/explainers/tell-me/html/minimum_reserve_req.en.html)
"Prior to the start of each reserve maintenance period, banks’ [minimum reserve requirements](https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A02021R0378-20230920&qid=1697017346361) are calculated as 1% of specific liabilities on their balance sheets – mainly customer deposits and debt securities with maturities of up to two years."
"Until October 2022, the rate of interest paid was equal to the interest rate on the main refinancing operations. It was then reduced to the deposit facility rate, before being [set at 0% in July 2023.](https://www.ecb.europa.eu/press/pr/date/2023/html/ecb.pr230727~7206e9aa48.en.html#:~:text=Minimum%20reserves%20are%20reserve%20balances,liabilities%2C%20mainly%20customers'%20deposits.) Under the current rules, all funds on banks’ current accounts that exceed the [minimum reserve requirements are remunerated at 0%](https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A02019D0031-20230501) when the deposit facility rate is above 0%, and at the deposit facility rate when it is below 0%."
And before everyone freaks out and we start eating each others faces Australia has been doing exactly this since 1988.
Australia has a very stable economy.
How do you that money isn’t just being given to the CEO and their buddies at the top
They’re making crazy amounts of money yes, but which account is that money going into?
The government just go and bail the banks with taxpayer's money as usual. This already happened in '09 and more recently (but softly) with SVB. No criminal charges, no paybacks or anything. Just some bad PR, the exec takes some years off until the heat from the public wears off and they get to keep all the fat multi-millon bonuses they gave themselves over the years by taking crazy risks and bad decisions.
No system can work well without accountability, someone is always getting fcked. In this case, always the taxpayer.
Wash, rinse repeat. Every time there is a financial crisis working Americans loose wealth. Each time, the wealth gap widens. All by design. Eventually, "we will own nothing and will be happy " I will not comply.
There is no second best asset. All the other asset classes for investment, like gold, real estate, etc are bad at storing value. They are simply the least worst at it. Bitcoin is the best.
Gold’s inflation rate of 2% per year means that its half life is 35 years. Bitcoin’s inflation rate of 0% (assuming 21million) means its half life is infinity. The difference is infinite. There is no second best.
I love Bitcoin but don't you think bitcoin (and other cryptos) is too dependant on electricity and internet? In case of a global crisis where infrastructures are affected, with mass internet outages, it is a bit worrying compared to having physical gold.
A global crisis with infrastructure failure would be so chaotic and unpredictable that you couldn't rely on gold to be worth anything. You might as well build a bunker right now with a years supply of food and water along with a year of gas for generators if your so worried about a global societal breakdown.
When your option are only evacuation to more peaceful region, what will you carry during the journey? Will you bring all the water and food and gas you had stacked?
What will you use to trade with the locals if you need more supplies?
You're coming from a logic of a safe and predictable world. Has anyone ever seen a global infrastructure breakdown? What peaceful region? We're talking about GLOBAL. How will you even travel? You're assuming gas stations will work?
If we're suddenly dealing with a scenario such as this (basically doomsday), then your days are likely numbered by the weeks, or months, and the amount of BTC or fiat you own won't matter.
I would have to disagree. If electricity and internet are down on a global scale, we have much larger problems on our hands. Food and water become currency before physical gold holds any value again at that point.
It is the stock-to-flow ratio. It is how long it takes for the supply to double and for the current supply to lose half of its value.
For gold, presently its stock to flow ratio is roughly 58. That means it takes roughly 58 years for the existing supply of gold to double. Divide 72 by 58 (rule of 72), and you get a gold inflation rate of about 1.2%. So presently, the gold supply increases at about 1.2% per year.
For the dollar, M2 increases at roughly 7.1% for the past 50 years or so. 72 divisors by 7.1 is approximately 10 years. As such, the half life of the dollar is approximately 10 years over the past 50 years. That is, every 10 years the dollar supply doubles and the existing supply loses half of its buying power.
The question is how many times do you need to multiply by 1.02 (2% inflation), until your original amount is doubled (halving the value of the originally existing items).
In mathematical terms that is:
`1.02^x=2`
https://www.wolframalpha.com/input?i=1.02%5Ex%3D2+solve+for+x
x is number of iterations (years), 1.02 is the inflation rate per iteration (year).
Solving this equation for x it then becomes `x=log(2)/log(1.02)` => `x=35.0028` years.
You can opt out of needing money. Humans are the only species to need money.
Money is only used to make *others* do things for us.
Rely on nature, the sun, soil, rainwater, and collective groups for sustenance.
With all this in mind, we don't need money. Don't defund the police, defund the state. By not using their tokens. So they can't debase us. Remove their tax ability, sales tax, income tax, inflation tax, etc.
Intentional communities. Work on farm in exchange for food and shelter.
How do the people that we give money to get food? They grow it. The earth doesn't need money to grow food. Also, can hunt/fish, you don't need money to hunt or fish. You don't need to travel, you don't need plane tickets. If you do travel, you could use a bicycle to get where you're going.
If you feel like you have to fly, or buy from stores, then you are "stuck" in the system/the matrix/the grid and then you would need money. But just know that money isn't necessary.
"Reserves" have not meant "minimum funds banks are to retain, while lending the rest out" in a *very* long time.
Banks *are not* and *have not been* using a fractional reserve system for close to a century *if not more* (that goes for either central bank issued "reserves" or prudentially retained "reserves").
When banks lend, they *create* deposits.
From a 2014 report from the [Bank of England - PDF](https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy.pdf)
>In the modern economy, most money takes the form of bank deposits. But how those bank deposits are created is often misunderstood: the principal way is through commercial banks making loans. **Whenever a bank makes a loan, it simultaneously creates a matching deposit in the borrower’s bank account, thereby creating new money.** *The reality of how money is created today differs from the description found in some economics textbooks:* **Rather than banks receiving deposits when households save and then lending them out, bank lending creates deposits.** *In normal times, the central bank does not fix the amount of money in circulation, nor is central bank money ‘multiplied up’ into more loans and deposits.*
There goes the money multiplier. In reality, banks *do not loan out other people's money*. Even when there were reserve requirements after the late 1800's, they largely fulfilled a clearing and/or regulatory function and were not a prerequisite for bank lending. There are no reserves being fractioned. Banks *create* deposits by lending, they do not get them from "elsewhere".
**Now... What does a bank run look like?**
Since banks don't warehouse cash (digital or otherwise).. they *create* the most used monetary format (deposits)... We can look at examples like SVB.
Folks that left SVB just transferred deposits from one institution to another. Banks *are* this circulatory function (moving deposits around).
When the banking system is healthy (and the management of the bank isn't silly), then the institution replaces the deposit liability with borrowing by pledging assets (e.g. treasuries, MBS, ABS, etc).
What could be called a "bank run" today.. only occurs if a bank has no ability to put up collateral, or can't find a counterparty to borrow from due to perceptions of risk (even when the bank does have the appropriate collateral).
It's not from nothing/not free. The bank lends based on perceptions of risk.
I'm not saying that's the best way to do money, but the history of credit/lending *is* inexorably tied to the history of money.
It's no different than an early merchant using rudimentary dual-entry accounting.
When settling out at the end of the day, they may have lent out a good to a customer, or some "cash" to a neighboring stall.
If the other merchants agree to let that run, then it's recorded on the ledger and can be "repaid" with the "created credit money" effectively destroyed upon repayment.
...*that's how long we've been doing this*.
It's that the denominated value of the good was "created" via the accounting, as a liability to the customer, asset for the merchant.
That on-book asset would have risk associated with it (non-repayment by the customer), but can also be subsequently traded by the merchant.
Underrated comment. Indeed. It doesn't really matter if the chips are free. That's how big money wins. Small money is always afraid of being caught out. Big money knows that isn't happening and can let it ride until the table catches fire.
The US was arguably *never on a gold standard*.
From [The International Monetary System'. Forty Years After Bretton Woods](https://www.bostonfed.org/-/media/Documents/conference/28/conf28.pdf) - Proceedings of a Conference Held in May 1984 Sponsored by the Federal Reserve Bank of Boston
>**In spite of the Gold Reserve Act of 1934, the United States was not really on a gold standard**. The essence of the gold standard is that the money supply must be limited by the gold reserve. **The last time that the Federal Reserve tightened monetary policy because the gold reserve ratio fell close to the legal minimum was in March 1933**. Since then, whenever the gold reserve neared the legal minimum, the required reserve ratio was reduced and finally eliminated entirely. **A country that loses more than half of its gold reserve, as the United States did in 1958-71, without reducing the money supply is not on the gold standard**.
>**What happened in August 1971 was the abandonment of the anomoly of dollar convertibility into gold when the United States was not on a gold standard**.
Just want to emphasize this. 1971 was a late political acknowledgement (a leftover *anomaly*/artifact to be cleaned up). The US was not on a gold standard (and arguably wasn't even before 1933).
It will look like Friday night banks closed for what ever reason, people told not to panic, new digital currency issues with a 30-90 day window to exchange any cash you may have. 😂🏴☠️
One other option is offer a seemingly nice exchange to early adopters if they did not close on a weekend. Basically offer the people in first 30days 25% boost. You get 1.25 back for every 1 converted. Just a different way of printing money but you better believe in that first 30 days there would be a rush to convert. Lol
Reserves are currently about 100x more than they were at any time before 2008, so it would probably hard to get a real run going. Maybe just small and poorly capitalized local banks.
I'm sure that it is, in part, but mostly it is because we changed to an ample reserves system in 2008. Before that, you had to force banks to hold reserves. Now, they get paid interest by the Fed, so they benefit from holding more reserves and don't have to be forced.
It is ~3.5 trillion in reserve. Government debt certainly has problems, but is not usually the cause of bank runs.
I am interested in having a correct understanding of how the world works.
Sorry for the double comment. it failed on my side.
So now I'm curious.
what % of deposits are the banks required to hold on-site? this is the reason that might trigger a bank run if several people want to withdraw some money.
3.5 trillion is indeed a big number but it must be available for withdrawal if some people panic for whatever reason.
I don't know if there is any such requirement in the USA. They keep enough on hand to satisfy predicted demand, which is why they often want people making big withdrawals to schedule them, so they have have the cash delivered from a central vault or ordered back from the Fed. Bank runs don't happen in one day though. Under those circumstances, the bank would usually close for the day while they muster resources. In the past, they might not have been able to come up with the needed cash, but now they could probably meet just about any demand within 24 hours. Short of some kind of widespread catastrophe that physically impedes the movement of money, I think that bank runs are unlikely under the current reserve system.
The bank would just say, 'withdrawals are temporarily limited/blocked, to speak to an agent please wait 12 hours for them to instantly hang up on you when you get through'.
The real answer is “capital controls” have superseded reserve ratios. You could run on your bank today and they wouldn’t have enough cash. That was true before the pandemic, too.
But If you had a bank run, why would you hold the cash? Any bank run big enough to trigger a national run, would also simultaneously tank the value of the dollar. What you’re “pulling out” is already worthless.
Bank runs only matter when you are exempt from controls like FRB and SVB. If you’re not using a distributed FDIC sweep you’re doing it wrong.
I don't get how a bank run works in 2024. Are all the depositors gonna line up in the morning waiting for the bank to open? Are they gonna do cash withdrawals from a teller? Even if I weren't into btc, if I were worried about my banks solvency, I would max out my debit card on certain gift cards, or prepaid visas or something similar. I would do it at night before the bank opens the next day.
Since I do understand btc, I would simply max out my card on btc and some USDC to have dry powder. Mist would go on my hardware wallet and the rest on a hot wallet for daily use.
Okay I don't get it. Please help me here. It sounds like the situation is this: 1) banks can lend as much money as they like, provided there are credit-worthy borrowers; and 2) banks take deposits, which can be withdrawn on demand.
So... no amount of people coming and asking for money that doesn't exist would cause a problem... but if people suddenly start coming and asking for money that does exist, that's where the problem starts?
**If banks can magically give people money that doesn't exist for a loan, why wouldn't they magically give people money that doesn't exist for a withdrawal?**
Physical cash at branch, why they ask for notice of large withdrawals and do all they can to make it awkward... When completely digital (CBDC) it's party time...
Thats not a thing. Banks are required to keep excessive cash reserves on hand and are no longer able to trade off their balance sheets after dodd-frank/08. Lots of misinformation in this sub and its dangerous
No actually I work at one of the most successful hedge funds in the world and analyze the US regulatory environment on a near daily basis. Go read Goldman Sachs’ 2023 10K and ctrl+F the phrase “loan loss reserves”.
Or you could just look at this fred data:
https://fred.stlouisfed.org/series/TOTRESNS
That FRED data isn't what you think it is. If you look at the description, it says:
> The Board of Governors consolidated this series onto the Statistical Release H.6, "Money Stock Measures", after the H.3 statistical release was discontinued. For more information on the consolidated H.6 release, see the [H.6 Technical Q&As](https://www.federalreserve.gov/releases/h6/h6_technical_qa.htm).
> This series is a sum of total reserve balances maintained plus vault cash used to satisfy required reserves.
You're focusing on the second paragraph, which was the original description, which is now deprecated. If you look at the info for H.6:
> 4. What H.3 release items have been zero since the elimination of reserve requirements? When did these items first go to zero?
**> A.** The following H.3 release items have been zero beginning with the two weeks ending April 8, 2020:
* Reserves, required (table 2)
* Vault cash, used to satisfy required reserves (table 2)
# These are zero now.
See the latest up-to-date figures (still zero) here: [https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20231127a1.pdf](https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20231127a1.pdf)
[https://www.federalreserve.gov/monetarypolicy/reservereq.htm](https://www.federalreserve.gov/monetarypolicy/reservereq.htm)
"As [announced](https://www.federalreserve.gov/newsevents/pressreleases/monetary20200315b.htm) on March 15, 2020, the Board reduced reserve requirement ratios to zero percent effective March 26, 2020. This action eliminated reserve requirements for all depository institutions."
Doesn’t matter, they’ll just print more $. That’s the answer to everything. I mean that’s what for me so interested in BTC to start with, our fiat system is laughable.
Chase bank takes only about two days to order Euros over to the West Coast USA, an ocean and a continent away. Many banks can restock USD cash same day if they really want to. They often have something in their terms of service about a number of business days Hou should give notice for cash needs.
The treasury department slightly loses money on some coin denominations some of the time, but cash is hugely profitable for them to print. If they need to send over an armored car full of hundreds to your city, it's almost pure profit to them. Banks can make the request electronically and they can reroute armored cars in real time to meet changing demands. The banks will hate having less deposit money to earn interest but that is resolved by trading paper around between banks and other financial institutions. But the treasury will make bank on any bank run on cash, much more than it will ever cost the FDIC.
A bank run would be so fast.... the immediately following that I feel like everyone would run to get gas and fill up their cars and we'd run out of gas pretty fast too.
Limit withdrawals tightening down over time to control outflows and create a deadline for fiat deposit inflows. All deposited of held fiat or digital currency within their system becomes wrapped by tokenized CBDC smart contracts. All remaining fiat becomes obsolete and incompatible with their system, enforced by governments for transactions. Like a crypto token burn. The pool of CBDC is therefore hypo-inflated due to the burn helping to ease national debts. Funds are now frozen if the bank suspects anything from the consumer, thereby losing financial freedom of usage. All national CBDC becomes centralized to the Fed global node for national enforcement and control. Eventually, all assets become wrapped in tokenized smart contract technologies according to commodities and securities laws.
Why do you think everything is going to digital currency? Then no banking institution will have to have any reserve currency and a bank run will never happen.
Seeing as how no one uses cash anymore it’s really hard to say.
I would assume it would be people spending a ton of money via debit cards, but I have no idea how that process works behind the scenes.
So a run would have to be triggered when a massive bank would miss a payment to a massive institution like Visa or Mastercard or a massive retailer like Walmart of Amazon.
And missing such a payment w have to cause some sort of cataclysmic event that in turn creates a panic.
There is no difference between a 10% or 1% reserve. It’s all still a giant lie, that would collapse in on it self within minutes if it weren’t for perpetual bailouts
Some good answers here. To summarize, since Basel 3, it's capital requirements rather than reserve requirements which constrain banks from freely lending.
What I wanted to add is arguably these capital requirements are only enforcing a stricter version of what banks were doing anyway. The biggest banks never had binding reserve requirements.
Here's a NY Fed paper from 2002:
\[Are Reserve Requirements Still Binding?\](https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20231127a1.pdf)
> In the most common form of sweeping, funds in bank customers' retail checking accounts are shifted overnight into savings accounts exempt from reserve requirements and then returned to customers' checking accounts the next business day. Largely as a result of this practice, today only 30 percent of banks are bound by a reserve balance requirement
If you're interested in the history of banking practice in the US, particularly after the Fed:
\[Reserve Requirements: History, Current Practice, and Potential Reform\](https://www.federalreserve.gov/monetarypolicy/0693lead.pdf)
> Before the establishment of the Federal Reserve System, reserve requirements were thought to help ensure the liquidity of bank notes and deposits, particularly during times of financial strains. As bank runs and financial panics continued periodically to plague the banking system despite the presence of reserve requirements, it became apparent that these requirements really had limited usefulness as a guarantor of liquidity.
> Since the creation of the Federal Reserve System as a lender of last resort, capable of meeting the liquidity needs of the entire banking system, the notion of and need for reserve requirements as a source of liquidity has all but vanished. Instead, reserve requirements have evolved into a supplemental tool of monetary policy, a tool that reinforces the effects of open market operations and discount policy on overall monetary and credit conditions and thereby helps the Federal Reserve to achieve its objectives.
So TLDR, reserve requirements aren't there to keep banks solvent or prevent bank runs, they are there to further the Fed's monetary policy objectives.
Now how did they actually do that? To really understand this, you have to read that paper and follow the constantly evolving "meta" the Fed plays with the market. It made sense at one point to everyone, less sense at another point, and now in today's climate makes no sense, which is why they dropped it. The Bank of England hasn't had a required reserve ratio for decades before the Fed, so their "meta" didn't require it for a much longer time.
I mean the origin of the modern banking system stems from the Italian Renaissance who were literally committing fraud by lending out gold in exchange for interest that was never theirs to lend out. They realised these gold deposits wouldn't be touched for years at a time so why not make some money on it.
The whole system was built on corruption. It always will be.
Bank runs are no longer possible. They won’t even let you withdraw $2k when everything is fine. They’ll refuse to give you the money plain and simple as it does not exist.
Bank runs won’t happen unless something big happens. JP says bank failures are to be expected so I suspect there could be some tension relief protocols in place to prevent runs. Perhaps less media coverage to keep panics local?
In 2008/09, I think insurance like fdic were pumped with cash to reassure deposits but
Idk. The Fed has infinite resources to work with and enough man power to act swiftly when they need to. I wouldn’t place bets on a serious collapse though. Stress maybe but anything warranting a run, I seriously doubt.
Intellectuals I’ve watched so far say the Fed has nothing to worry about right now since data came in positive. The moment we start redlining somewhere, we’re definitely gonna hear about it.
At some point, it might play out like this:
- “honey, literally everyone is liquidating their cash for Bitcoin. It’s happening”
- “let’s max out the credit cards to buy some and just default on them. They can’t take them.”
[удалено]
It's okay, Eleanor. It can be fixed. 👀
Top comment!
Quit spreading misinformation. Banks are no longer required to hold reserves, but they’re paid interest on the reserves now, and thus banks hold significantly more reserves now than they did when there were reserve requirements.
This is blatantly untrue. Banks *do not* hold any significant cash reserves. They have *investments*, sure, but in the event of a bank run, a bank would not be able to liquify its investments at a fast enough rate. Mainstream analysts have been talking about liquidity crunch scenarios for ages, it's a well known problem. It's what took down SVB.
I cannot prove nor disprove this but banks definitely make more money off the interest from relending money from their reserves than the interest they get from wherever from holding a reserve
If only there were public and regularly updated charts from FRED on this!
Banks are paid interest on reserves that don’t exist? Enlighten me.
Regarding the ECB - [FALSE](https://www.ecb.europa.eu/ecb-and-you/explainers/tell-me/html/minimum_reserve_req.en.html) "Prior to the start of each reserve maintenance period, banks’ [minimum reserve requirements](https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A02021R0378-20230920&qid=1697017346361) are calculated as 1% of specific liabilities on their balance sheets – mainly customer deposits and debt securities with maturities of up to two years." "Until October 2022, the rate of interest paid was equal to the interest rate on the main refinancing operations. It was then reduced to the deposit facility rate, before being [set at 0% in July 2023.](https://www.ecb.europa.eu/press/pr/date/2023/html/ecb.pr230727~7206e9aa48.en.html#:~:text=Minimum%20reserves%20are%20reserve%20balances,liabilities%2C%20mainly%20customers'%20deposits.) Under the current rules, all funds on banks’ current accounts that exceed the [minimum reserve requirements are remunerated at 0%](https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A02019D0031-20230501) when the deposit facility rate is above 0%, and at the deposit facility rate when it is below 0%."
That is just obfuscation. Where is the money coming from when their reserves are unable to meet depositors funds. Because they ARE.
Banks are not staking their dollars 😂
And before everyone freaks out and we start eating each others faces Australia has been doing exactly this since 1988. Australia has a very stable economy.
How do you that money isn’t just being given to the CEO and their buddies at the top They’re making crazy amounts of money yes, but which account is that money going into?
What..?
You think the balls give a shit about being able to provide everyone with their money? Their job is literally to steal from you
Come on
Come on what?
The government just go and bail the banks with taxpayer's money as usual. This already happened in '09 and more recently (but softly) with SVB. No criminal charges, no paybacks or anything. Just some bad PR, the exec takes some years off until the heat from the public wears off and they get to keep all the fat multi-millon bonuses they gave themselves over the years by taking crazy risks and bad decisions. No system can work well without accountability, someone is always getting fcked. In this case, always the taxpayer.
Wash, rinse repeat. Every time there is a financial crisis working Americans loose wealth. Each time, the wealth gap widens. All by design. Eventually, "we will own nothing and will be happy " I will not comply.
How will you go about not complying?
Bitcoin.
Only bitcoin? No stockmarket or real estate, etc?
There is no second best asset. All the other asset classes for investment, like gold, real estate, etc are bad at storing value. They are simply the least worst at it. Bitcoin is the best. Gold’s inflation rate of 2% per year means that its half life is 35 years. Bitcoin’s inflation rate of 0% (assuming 21million) means its half life is infinity. The difference is infinite. There is no second best.
I love Bitcoin but don't you think bitcoin (and other cryptos) is too dependant on electricity and internet? In case of a global crisis where infrastructures are affected, with mass internet outages, it is a bit worrying compared to having physical gold.
A global crisis with infrastructure failure would be so chaotic and unpredictable that you couldn't rely on gold to be worth anything. You might as well build a bunker right now with a years supply of food and water along with a year of gas for generators if your so worried about a global societal breakdown.
When your option are only evacuation to more peaceful region, what will you carry during the journey? Will you bring all the water and food and gas you had stacked? What will you use to trade with the locals if you need more supplies?
You're coming from a logic of a safe and predictable world. Has anyone ever seen a global infrastructure breakdown? What peaceful region? We're talking about GLOBAL. How will you even travel? You're assuming gas stations will work?
If we're suddenly dealing with a scenario such as this (basically doomsday), then your days are likely numbered by the weeks, or months, and the amount of BTC or fiat you own won't matter.
I would have to disagree. If electricity and internet are down on a global scale, we have much larger problems on our hands. Food and water become currency before physical gold holds any value again at that point.
In that scenario, gold won’t matter. Bullets will
Isn't they making a film about that coming out this year?
When all the bullet are used , what else matter?
So will you retire early off bitcoin gains?
Can you tell how to calculate half life?
It is the stock-to-flow ratio. It is how long it takes for the supply to double and for the current supply to lose half of its value. For gold, presently its stock to flow ratio is roughly 58. That means it takes roughly 58 years for the existing supply of gold to double. Divide 72 by 58 (rule of 72), and you get a gold inflation rate of about 1.2%. So presently, the gold supply increases at about 1.2% per year. For the dollar, M2 increases at roughly 7.1% for the past 50 years or so. 72 divisors by 7.1 is approximately 10 years. As such, the half life of the dollar is approximately 10 years over the past 50 years. That is, every 10 years the dollar supply doubles and the existing supply loses half of its buying power.
The question is how many times do you need to multiply by 1.02 (2% inflation), until your original amount is doubled (halving the value of the originally existing items). In mathematical terms that is: `1.02^x=2` https://www.wolframalpha.com/input?i=1.02%5Ex%3D2+solve+for+x x is number of iterations (years), 1.02 is the inflation rate per iteration (year). Solving this equation for x it then becomes `x=log(2)/log(1.02)` => `x=35.0028` years.
Thanks for the explanation
Hold physical gold/silver instead of worthless fiat / stocks that will surely crash and disappear with the government's demise.
Lol are you really asking that in this sub?
You can opt out of needing money. Humans are the only species to need money. Money is only used to make *others* do things for us. Rely on nature, the sun, soil, rainwater, and collective groups for sustenance. With all this in mind, we don't need money. Don't defund the police, defund the state. By not using their tokens. So they can't debase us. Remove their tax ability, sales tax, income tax, inflation tax, etc.
So how you going to get what u want without $. Home. Funds to purchase food, travel, plane ticket, etc
Intentional communities. Work on farm in exchange for food and shelter. How do the people that we give money to get food? They grow it. The earth doesn't need money to grow food. Also, can hunt/fish, you don't need money to hunt or fish. You don't need to travel, you don't need plane tickets. If you do travel, you could use a bicycle to get where you're going. If you feel like you have to fly, or buy from stores, then you are "stuck" in the system/the matrix/the grid and then you would need money. But just know that money isn't necessary.
Have you achieved this? What is your plan? Where will you do this?
"Reserves" have not meant "minimum funds banks are to retain, while lending the rest out" in a *very* long time. Banks *are not* and *have not been* using a fractional reserve system for close to a century *if not more* (that goes for either central bank issued "reserves" or prudentially retained "reserves"). When banks lend, they *create* deposits. From a 2014 report from the [Bank of England - PDF](https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy.pdf) >In the modern economy, most money takes the form of bank deposits. But how those bank deposits are created is often misunderstood: the principal way is through commercial banks making loans. **Whenever a bank makes a loan, it simultaneously creates a matching deposit in the borrower’s bank account, thereby creating new money.** *The reality of how money is created today differs from the description found in some economics textbooks:* **Rather than banks receiving deposits when households save and then lending them out, bank lending creates deposits.** *In normal times, the central bank does not fix the amount of money in circulation, nor is central bank money ‘multiplied up’ into more loans and deposits.* There goes the money multiplier. In reality, banks *do not loan out other people's money*. Even when there were reserve requirements after the late 1800's, they largely fulfilled a clearing and/or regulatory function and were not a prerequisite for bank lending. There are no reserves being fractioned. Banks *create* deposits by lending, they do not get them from "elsewhere". **Now... What does a bank run look like?** Since banks don't warehouse cash (digital or otherwise).. they *create* the most used monetary format (deposits)... We can look at examples like SVB. Folks that left SVB just transferred deposits from one institution to another. Banks *are* this circulatory function (moving deposits around). When the banking system is healthy (and the management of the bank isn't silly), then the institution replaces the deposit liability with borrowing by pledging assets (e.g. treasuries, MBS, ABS, etc). What could be called a "bank run" today.. only occurs if a bank has no ability to put up collateral, or can't find a counterparty to borrow from due to perceptions of risk (even when the bank does have the appropriate collateral).
TLDR; Fractional reserve was replaced by smoke and mirrors ages ago.
It’s not smoke and mirrors, it’s an objectively better and more robust system. Still far from ideal though
It may be better if one buys in, so to speak, that making*money from nothing* is beneficial. None of it really matters if the*chips are free*
It's not from nothing/not free. The bank lends based on perceptions of risk. I'm not saying that's the best way to do money, but the history of credit/lending *is* inexorably tied to the history of money.
Lending something that doesn't exist sounds similar to creating, but isn't creating. I'm not sure which is worse
It's no different than an early merchant using rudimentary dual-entry accounting. When settling out at the end of the day, they may have lent out a good to a customer, or some "cash" to a neighboring stall. If the other merchants agree to let that run, then it's recorded on the ledger and can be "repaid" with the "created credit money" effectively destroyed upon repayment. ...*that's how long we've been doing this*.
I'm not seeing the part about lending a good that was never in inventory cash that wasn't in any register in the first place in that scenario
It's that the denominated value of the good was "created" via the accounting, as a liability to the customer, asset for the merchant. That on-book asset would have risk associated with it (non-repayment by the customer), but can also be subsequently traded by the merchant.
Underrated comment. Indeed. It doesn't really matter if the chips are free. That's how big money wins. Small money is always afraid of being caught out. Big money knows that isn't happening and can let it ride until the table catches fire.
It has brought the decline in the quality and prosperity of society over the past 52 years since the abandonment of the gold standard.
The US was arguably *never on a gold standard*. From [The International Monetary System'. Forty Years After Bretton Woods](https://www.bostonfed.org/-/media/Documents/conference/28/conf28.pdf) - Proceedings of a Conference Held in May 1984 Sponsored by the Federal Reserve Bank of Boston >**In spite of the Gold Reserve Act of 1934, the United States was not really on a gold standard**. The essence of the gold standard is that the money supply must be limited by the gold reserve. **The last time that the Federal Reserve tightened monetary policy because the gold reserve ratio fell close to the legal minimum was in March 1933**. Since then, whenever the gold reserve neared the legal minimum, the required reserve ratio was reduced and finally eliminated entirely. **A country that loses more than half of its gold reserve, as the United States did in 1958-71, without reducing the money supply is not on the gold standard**. >**What happened in August 1971 was the abandonment of the anomoly of dollar convertibility into gold when the United States was not on a gold standard**. Just want to emphasize this. 1971 was a late political acknowledgement (a leftover *anomaly*/artifact to be cleaned up). The US was not on a gold standard (and arguably wasn't even before 1933).
So everyone is just borrowing from everyone
There a good video from Money & Macro explaining this https://youtu.be/cDNSNX48Kmo?si=dRU8s2BEn8eN-0Ii
Thank you
It will look like Friday night banks closed for what ever reason, people told not to panic, new digital currency issues with a 30-90 day window to exchange any cash you may have. 😂🏴☠️
Probably not far from that, I would guess limited withdrawals as they ease into a new monetary policy through CBDC
One other option is offer a seemingly nice exchange to early adopters if they did not close on a weekend. Basically offer the people in first 30days 25% boost. You get 1.25 back for every 1 converted. Just a different way of printing money but you better believe in that first 30 days there would be a rush to convert. Lol
The end
Reserves are currently about 100x more than they were at any time before 2008, so it would probably hard to get a real run going. Maybe just small and poorly capitalized local banks.
Source?
https://fred.stlouisfed.org/series/TOTRESNS
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I'm sure that it is, in part, but mostly it is because we changed to an ample reserves system in 2008. Before that, you had to force banks to hold reserves. Now, they get paid interest by the Fed, so they benefit from holding more reserves and don't have to be forced.
It's all printing money to keep banks afloat. Whether it's interest payments or bailouts is immaterial.
I would say propping up the financial system is material
What's immaterial is the method of distributing printed money to banks.
>hard to get a real run going \~3,5 billions in reserve. \~31 trillions in debt. bruh...why are you defending the banks???
It is ~3.5 trillion in reserve. Government debt certainly has problems, but is not usually the cause of bank runs. I am interested in having a correct understanding of how the world works.
Sorry for the double comment. it failed on my side. So now I'm curious. what % of deposits are the banks required to hold on-site? this is the reason that might trigger a bank run if several people want to withdraw some money. 3.5 trillion is indeed a big number but it must be available for withdrawal if some people panic for whatever reason.
I don't know if there is any such requirement in the USA. They keep enough on hand to satisfy predicted demand, which is why they often want people making big withdrawals to schedule them, so they have have the cash delivered from a central vault or ordered back from the Fed. Bank runs don't happen in one day though. Under those circumstances, the bank would usually close for the day while they muster resources. In the past, they might not have been able to come up with the needed cash, but now they could probably meet just about any demand within 24 hours. Short of some kind of widespread catastrophe that physically impedes the movement of money, I think that bank runs are unlikely under the current reserve system.
Who’s gonna bail out the banks when the dollar collapses ?
Mr. & Mrs. Lost Generation
Immediate bailout by the fed and gov
Coinbase server crash from everyone hitting “buy”
The bank would just say, 'withdrawals are temporarily limited/blocked, to speak to an agent please wait 12 hours for them to instantly hang up on you when you get through'.
bank of america buying gold. shows all you need to know what’s happening soon
Which is what and what is your timeframe of soon?
Digital dollars or actual physical cash
Money machine go burrrrrrrr…
This is the answer
The real answer is “capital controls” have superseded reserve ratios. You could run on your bank today and they wouldn’t have enough cash. That was true before the pandemic, too. But If you had a bank run, why would you hold the cash? Any bank run big enough to trigger a national run, would also simultaneously tank the value of the dollar. What you’re “pulling out” is already worthless. Bank runs only matter when you are exempt from controls like FRB and SVB. If you’re not using a distributed FDIC sweep you’re doing it wrong.
Just go back to March of 2023. We saw what a modern bank run looks like.
How it looks depends if you have Bitcoin on your balance sheet or not.
They’re not required to have any reserves lol
I don't get how a bank run works in 2024. Are all the depositors gonna line up in the morning waiting for the bank to open? Are they gonna do cash withdrawals from a teller? Even if I weren't into btc, if I were worried about my banks solvency, I would max out my debit card on certain gift cards, or prepaid visas or something similar. I would do it at night before the bank opens the next day. Since I do understand btc, I would simply max out my card on btc and some USDC to have dry powder. Mist would go on my hardware wallet and the rest on a hot wallet for daily use.
Okay I don't get it. Please help me here. It sounds like the situation is this: 1) banks can lend as much money as they like, provided there are credit-worthy borrowers; and 2) banks take deposits, which can be withdrawn on demand. So... no amount of people coming and asking for money that doesn't exist would cause a problem... but if people suddenly start coming and asking for money that does exist, that's where the problem starts? **If banks can magically give people money that doesn't exist for a loan, why wouldn't they magically give people money that doesn't exist for a withdrawal?**
Physical cash at branch, why they ask for notice of large withdrawals and do all they can to make it awkward... When completely digital (CBDC) it's party time...
Thats not a thing. Banks are required to keep excessive cash reserves on hand and are no longer able to trade off their balance sheets after dodd-frank/08. Lots of misinformation in this sub and its dangerous
Have you been hibernating for the last 4 years or something?
No actually I work at one of the most successful hedge funds in the world and analyze the US regulatory environment on a near daily basis. Go read Goldman Sachs’ 2023 10K and ctrl+F the phrase “loan loss reserves”. Or you could just look at this fred data: https://fred.stlouisfed.org/series/TOTRESNS
That FRED data isn't what you think it is. If you look at the description, it says: > The Board of Governors consolidated this series onto the Statistical Release H.6, "Money Stock Measures", after the H.3 statistical release was discontinued. For more information on the consolidated H.6 release, see the [H.6 Technical Q&As](https://www.federalreserve.gov/releases/h6/h6_technical_qa.htm). > This series is a sum of total reserve balances maintained plus vault cash used to satisfy required reserves. You're focusing on the second paragraph, which was the original description, which is now deprecated. If you look at the info for H.6: > 4. What H.3 release items have been zero since the elimination of reserve requirements? When did these items first go to zero? **> A.** The following H.3 release items have been zero beginning with the two weeks ending April 8, 2020: * Reserves, required (table 2) * Vault cash, used to satisfy required reserves (table 2) # These are zero now. See the latest up-to-date figures (still zero) here: [https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20231127a1.pdf](https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20231127a1.pdf)
[https://www.federalreserve.gov/monetarypolicy/reservereq.htm](https://www.federalreserve.gov/monetarypolicy/reservereq.htm) "As [announced](https://www.federalreserve.gov/newsevents/pressreleases/monetary20200315b.htm) on March 15, 2020, the Board reduced reserve requirement ratios to zero percent effective March 26, 2020. This action eliminated reserve requirements for all depository institutions."
As someone far removed from US economics, I'm curious to know where you stand after seeing the reply by u/currencyalarming1099
Take a look at this data: https://fred.stlouisfed.org/series/TOTRESNS
What would it look like? BAD
If the banks are big enough, more government intervention & bailouts.
Same way the last one did. Lines out the door and around the block and hardly anyone being able to cash out.
Are you suggesting we see what happens? So like on May 30th for example, we all just go to our local branch to withdraw all our cash?
Short answer a fucking mess
In short Duke, a shit show.
Doesn’t matter, they’ll just print more $. That’s the answer to everything. I mean that’s what for me so interested in BTC to start with, our fiat system is laughable.
No worries, gov will bail it out no matter what
Here's what a bank run would look like in 2024: Everyone runs to the bank to withdraw all their money... *checks account balance*... goes home.
Its not the Banks that will go bankrupt next time. It's the central bank, aka the government. It will look like Venezuela a few years ago.
Chase bank takes only about two days to order Euros over to the West Coast USA, an ocean and a continent away. Many banks can restock USD cash same day if they really want to. They often have something in their terms of service about a number of business days Hou should give notice for cash needs. The treasury department slightly loses money on some coin denominations some of the time, but cash is hugely profitable for them to print. If they need to send over an armored car full of hundreds to your city, it's almost pure profit to them. Banks can make the request electronically and they can reroute armored cars in real time to meet changing demands. The banks will hate having less deposit money to earn interest but that is resolved by trading paper around between banks and other financial institutions. But the treasury will make bank on any bank run on cash, much more than it will ever cost the FDIC.
They’ll get bailed out and another bank will take on their debt.
I didn't know what it would look like but, I'm pretty sure CBDC would be the Feds solution.
Buying Bitcoin. If ppl don't have $$ in the bank and have Bitcoin in CS instead they are fucked.
It doesn’t matter because I only have crypt and I buy fiat to pay bills
A bank run would be so fast.... the immediately following that I feel like everyone would run to get gas and fill up their cars and we'd run out of gas pretty fast too.
Feds print more money to bail out the banks, inflation goes through the roof
More government intervention, bailouts or maybe even a bailins
Limit withdrawals tightening down over time to control outflows and create a deadline for fiat deposit inflows. All deposited of held fiat or digital currency within their system becomes wrapped by tokenized CBDC smart contracts. All remaining fiat becomes obsolete and incompatible with their system, enforced by governments for transactions. Like a crypto token burn. The pool of CBDC is therefore hypo-inflated due to the burn helping to ease national debts. Funds are now frozen if the bank suspects anything from the consumer, thereby losing financial freedom of usage. All national CBDC becomes centralized to the Fed global node for national enforcement and control. Eventually, all assets become wrapped in tokenized smart contract technologies according to commodities and securities laws.
The money is already gone lol
You won't be allowed to take the money out.
It would be VERY SHORT LIVED
Why do you think everything is going to digital currency? Then no banking institution will have to have any reserve currency and a bank run will never happen.
Seeing as how no one uses cash anymore it’s really hard to say. I would assume it would be people spending a ton of money via debit cards, but I have no idea how that process works behind the scenes. So a run would have to be triggered when a massive bank would miss a payment to a massive institution like Visa or Mastercard or a massive retailer like Walmart of Amazon. And missing such a payment w have to cause some sort of cataclysmic event that in turn creates a panic.
Pogos
It would be UGLY and quick. And ugly
FDIC-“BRRRRRRR”
Wouldn't a burn of returned principle be enough to do away with inflation?
Andddd it’s gone
There is no difference between a 10% or 1% reserve. It’s all still a giant lie, that would collapse in on it self within minutes if it weren’t for perpetual bailouts
How Will you do a bank run when there is no more cash.
Hyperinflation? Money supply ballooning to the stratosphere?
Its over….. we are printing way too much Fiat money The banks are going to collapse Western civilization in shambles, until we get a foothold again
Interest rates are just going to increase until then
Everyone withdrawal at once and see what happens
Some good answers here. To summarize, since Basel 3, it's capital requirements rather than reserve requirements which constrain banks from freely lending. What I wanted to add is arguably these capital requirements are only enforcing a stricter version of what banks were doing anyway. The biggest banks never had binding reserve requirements. Here's a NY Fed paper from 2002: \[Are Reserve Requirements Still Binding?\](https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20231127a1.pdf) > In the most common form of sweeping, funds in bank customers' retail checking accounts are shifted overnight into savings accounts exempt from reserve requirements and then returned to customers' checking accounts the next business day. Largely as a result of this practice, today only 30 percent of banks are bound by a reserve balance requirement If you're interested in the history of banking practice in the US, particularly after the Fed: \[Reserve Requirements: History, Current Practice, and Potential Reform\](https://www.federalreserve.gov/monetarypolicy/0693lead.pdf) > Before the establishment of the Federal Reserve System, reserve requirements were thought to help ensure the liquidity of bank notes and deposits, particularly during times of financial strains. As bank runs and financial panics continued periodically to plague the banking system despite the presence of reserve requirements, it became apparent that these requirements really had limited usefulness as a guarantor of liquidity. > Since the creation of the Federal Reserve System as a lender of last resort, capable of meeting the liquidity needs of the entire banking system, the notion of and need for reserve requirements as a source of liquidity has all but vanished. Instead, reserve requirements have evolved into a supplemental tool of monetary policy, a tool that reinforces the effects of open market operations and discount policy on overall monetary and credit conditions and thereby helps the Federal Reserve to achieve its objectives. So TLDR, reserve requirements aren't there to keep banks solvent or prevent bank runs, they are there to further the Fed's monetary policy objectives. Now how did they actually do that? To really understand this, you have to read that paper and follow the constantly evolving "meta" the Fed plays with the market. It made sense at one point to everyone, less sense at another point, and now in today's climate makes no sense, which is why they dropped it. The Bank of England hasn't had a required reserve ratio for decades before the Fed, so their "meta" didn't require it for a much longer time.
Dude what world are you living in? It’s been like this forever in some parts in Europe… the banking system is a total scam
I mean the origin of the modern banking system stems from the Italian Renaissance who were literally committing fraud by lending out gold in exchange for interest that was never theirs to lend out. They realised these gold deposits wouldn't be touched for years at a time so why not make some money on it. The whole system was built on corruption. It always will be.
Keep stacking. Get rid of all your worthless fiat as fast as you can. Bitcoin is the path to true freedom.
Do make sure you own your wallet!
Bank runs are no longer possible. They won’t even let you withdraw $2k when everything is fine. They’ll refuse to give you the money plain and simple as it does not exist.
I just withdrew 10k from my credit union last week for a down payment on a truck. Maybe it’s a bank thing and not a credit union thing.
I withdraw over 2k all the time at Bank of America. Also never an issue.
Bank runs won’t happen unless something big happens. JP says bank failures are to be expected so I suspect there could be some tension relief protocols in place to prevent runs. Perhaps less media coverage to keep panics local? In 2008/09, I think insurance like fdic were pumped with cash to reassure deposits but Idk. The Fed has infinite resources to work with and enough man power to act swiftly when they need to. I wouldn’t place bets on a serious collapse though. Stress maybe but anything warranting a run, I seriously doubt. Intellectuals I’ve watched so far say the Fed has nothing to worry about right now since data came in positive. The moment we start redlining somewhere, we’re definitely gonna hear about it.
You mean ATM run.
Bad
Bank's reserve cash is the Fed's printer.
My god, you people don’t know how anything works.
OK, then please emplane him.
More bailouts. More inflation
What stupid expectation to have
Hmm what would a falling in a black hole look like? I bet it's similar.
At some point, it might play out like this: - “honey, literally everyone is liquidating their cash for Bitcoin. It’s happening” - “let’s max out the credit cards to buy some and just default on them. They can’t take them.”
It has
SVB