But the fundamental problem with this is that obviously the bank is not making any income, so it can't even pay an employee, let alone make a profit.īanks only work because people believe they workĬheers ( just wish it was in an article to read in a few minutes rather than a 45min video). If you want a bank to 100% invincible, you need to keep 100% of the deposit money in cash so that if 100% of the customers want to withdraw all their money, they can. They keep enough of the deposits as cash at any one time to, hopefully, pay out for any withdrawals. Stripping all the complication away, banks take money from depositors like you and me and lend that money, or invest it, in governments and companies and other misc things. It wasn't due to poorly managed banking or lack of regulation, it was due to a run on the bank, necessitating the banks liquidation of certain assets at a very inopportune moment, resulting in big losses.Īny bank can be forced into liquidation if the run on the bank is sufficiently large, that is nothing to do with management of the bank or strength of regulation, it's an inevitability of the combination of mass panic and the model that all banks are run on. (yes, still a bank run, but if all your depositors are crypto companies, you get what you deserve). And maybe that will help keep traditional banking away from the crime-ridden black tar heroin scam shi*pile that is crypto. It is a tiny bank that only had a few billion dollars, so the losses will be negligible but it will provide a good exemplar for everyone else of what happens when you use normal banking rules with crypto clients. The little one was a pretty specialist case and yet another good object lesson in what happens when you open yourself up to the gigantic risks associated with the crypto sphere.
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