#define on Nostr: It's difficult to see an outcome that prevents dollar devaluation... Due to fear of ...
It's difficult to see an outcome that prevents dollar devaluation...
Due to fear of bank runs, liquidity flows from small banks to large systemically significant banks (in hopes that the large would be bailed out if needed).
Besides the risk of de-diversification of the banking system (eggs in fewer baskets, more reliance on the risk management practices of fewer banks), it's prudent to consider next order effects.
If the large banks encounter liquidity issues...
Bail outs (or even bail-ins) would likely cause money printing (the money needs come from somewhere), and further devaluation of the very dollar people are hoping that the banks will custody for them (fractionally reserve).
Spreading money over several < $250k accounts might seem like protection, but if many did it in mass, the FDIC insurance would likely be unable to cover all insured deposits (currently about 1%). To backstop the FDIC, the fund would need to increase (either through political intervention, perhaps through more money printing, or through increased contribution from banks, either increasing fees, lowering depositor earned rates, or drastically through bail-in).
Perhaps if there was a form of money with less counterparty risk and debasement risk...
dylan (npub1pyp…c0qq)
ODELL (npub1qny…95gx)
Due to fear of bank runs, liquidity flows from small banks to large systemically significant banks (in hopes that the large would be bailed out if needed).
Besides the risk of de-diversification of the banking system (eggs in fewer baskets, more reliance on the risk management practices of fewer banks), it's prudent to consider next order effects.
If the large banks encounter liquidity issues...
Bail outs (or even bail-ins) would likely cause money printing (the money needs come from somewhere), and further devaluation of the very dollar people are hoping that the banks will custody for them (fractionally reserve).
Spreading money over several < $250k accounts might seem like protection, but if many did it in mass, the FDIC insurance would likely be unable to cover all insured deposits (currently about 1%). To backstop the FDIC, the fund would need to increase (either through political intervention, perhaps through more money printing, or through increased contribution from banks, either increasing fees, lowering depositor earned rates, or drastically through bail-in).
Perhaps if there was a form of money with less counterparty risk and debasement risk...
dylan (npub1pyp…c0qq)
ODELL (npub1qny…95gx)