26/
Part 2 of Bank Runs thread continues below. The beginning portion of this thread can be found here:
Part 2 of Bank Runs thread continues below. The beginning portion of this thread can be found here:
https://twitter.com/CoinbitsApp/status/1554892785903435780?s=20&t=JRUOFun83w4sn9FXlKxOOw
27/
Banks kept a portion of reserves as cash in their vaults and the bulk of their reserves as deposits in correspondent banks in certain cities.
Many, but not all, of the ultimate correspondents belonged to the Federal Reserve System.
This reserve PYRAMID setup limited...
Banks kept a portion of reserves as cash in their vaults and the bulk of their reserves as deposits in correspondent banks in certain cities.
Many, but not all, of the ultimate correspondents belonged to the Federal Reserve System.
This reserve PYRAMID setup limited...
28/
country banks’ access to reserves during times of crisis. When a bank needed cash-- because its customers were panicking and withdrawing funds en masse -- the bank had to turn to its correspondent, which might be faced with requests from many banks simultaneously or...
country banks’ access to reserves during times of crisis. When a bank needed cash-- because its customers were panicking and withdrawing funds en masse -- the bank had to turn to its correspondent, which might be faced with requests from many banks simultaneously or...
29/
might be beset by depositor runs itself. The correspondent bank also might not have the funds on hand because its reserves consisted of checks in the mail, rather than cash in its vault.... And so on, and on, and on.
Oye ve😪
The obvious solution to any sane person would be
might be beset by depositor runs itself. The correspondent bank also might not have the funds on hand because its reserves consisted of checks in the mail, rather than cash in its vault.... And so on, and on, and on.
Oye ve😪
The obvious solution to any sane person would be
30/
to depart from the fractional reserve system that is very clearly the root cause
Instead, we doubled down on the stupidity, created the FDIC, and gave even more power to the Fed to help avoid the problem *they created in the first place* from happening again🤡
The fix?👇
to depart from the fractional reserve system that is very clearly the root cause
Instead, we doubled down on the stupidity, created the FDIC, and gave even more power to the Fed to help avoid the problem *they created in the first place* from happening again🤡
The fix?👇
31/
So what's the solution?
#Bitcoin fixes this.
Bitcoin's credibly enforced (h/t @parkeralewis) 21MM supply cap destroys the ability of any entity to be "the lender of last resort" and to create new monetary units out of thin air to meet a "liquidity demand".. Can banks exist..
So what's the solution?
#Bitcoin fixes this.
Bitcoin's credibly enforced (h/t @parkeralewis) 21MM supply cap destroys the ability of any entity to be "the lender of last resort" and to create new monetary units out of thin air to meet a "liquidity demand".. Can banks exist..
32/
... in a bitcoin standard world?
Yes! As long as they provide valuable service to their users, any business, banks included, can exist.
The only thing they wouldn't be able to do (rather do AND survive) is fractional-reserve banking, the root cause of all this madness.
... in a bitcoin standard world?
Yes! As long as they provide valuable service to their users, any business, banks included, can exist.
The only thing they wouldn't be able to do (rather do AND survive) is fractional-reserve banking, the root cause of all this madness.
33/
what would a full reserve banking experience look like under #BTC ?
This is a much more nuanced topic than we can address in a twitter thread.
Check out these discussions:
@stephanlivera @BitcoinPierre
stephanlivera.com/episode/402/
and @saifedean - saifedean.com/podcast/79-wou…
what would a full reserve banking experience look like under #BTC ?
This is a much more nuanced topic than we can address in a twitter thread.
Check out these discussions:
@stephanlivera @BitcoinPierre
stephanlivera.com/episode/402/
and @saifedean - saifedean.com/podcast/79-wou…
34/
one thing is for certain: the current debt-based, fraction-of-a-fraction reserve system will inevitably face new bank runs, which will inevitably lead to the creation of more 💸 to avoid a 1930 bank run scenario from happening again.
As @FossGregfoss says: it's just #math
one thing is for certain: the current debt-based, fraction-of-a-fraction reserve system will inevitably face new bank runs, which will inevitably lead to the creation of more 💸 to avoid a 1930 bank run scenario from happening again.
As @FossGregfoss says: it's just #math
35/35
fin.
If you've made it this far, THANK YOU!
If you've learned something valuable from this 2-part thread, help us spread the word by retweeting:
fin.
If you've made it this far, THANK YOU!
If you've learned something valuable from this 2-part thread, help us spread the word by retweeting:
https://twitter.com/CoinbitsApp/status/1554892785903435780?s=20&t=JRUOFun83w4sn9FXlKxOOw
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