The problem is banks operate in a state of perpetual insolvency. Their ability to pay off their debts to customers depends on the state of the larger economy. Too many defaults and the whole thing comes crashing down.
> At no point is cash conservation broken.
It never existed to begin with. All that's required for the illusion to disappear is for enough people to attempt to withdraw funds at the same time.
> I know that the bank has plenty of other peoples’ $900 that if I wanted that cash I could take it.
> The International Monetary Fund estimated that large U.S. and European banks lost more than $1 trillion on toxic assets and from bad loans
> Lack of investor confidence in bank solvency and declines in credit availability led to plummeting stock and commodity prices
> The crisis rapidly spread into a global economic shock, resulting in several bank failures
> The de-leveraging of financial institutions, as assets were sold to pay back obligations that could not be refinanced in frozen credit markets, further accelerated the solvency crisis
> governments and central banks provided then-unprecedented trillions of dollars in bailouts and stimulus, including expansive fiscal policy and monetary policy to offset the decline in consumption and lending capacity, avoid a further collapse, encourage lending, restore faith in the integral commercial paper markets, avoid the risk of a deflationary spiral, and provide banks with enough funds to allow customers to make withdrawals
People complain about Tether but the whole banking system is just Tether on steroids.
> People complain about Tether but the whole banking system is just Tether on steroids.
With regulation, and audits, and insurance, and government guarantees that if something goes really wrong you will be made whole (as long as you don't deposit more than 7 years the median US income).
I also wouldn't deposit my money in an 1890's US bank.
You’re just repeating the same thing over and over. I still don’t think at any point the bank is multiplying money in any kind of real or concerning way.
You should really read up on this. He explains it fairly well, and yes, money are multiplied with fractional reserve banking. Since the bank only needs to keep a fraction of the money they owe to account holders, they can loan the rest out. But the point is that this loaned money ends up on some other customers bank account, possibly with the same bank, and can thus be loaned out again. So in a 20% reserve requirement situation, _the same money_ can be used to finance the building of five houses, not just one which it would be if the reserve requirement was 100%.
Banks duplicate your money endlessly. After money that existed only in your possession is deposited at a bank, it will exist in many places simultaneously: in your account, in other people's accounts, as loans to third parties. If you don't see how that inflates the money supply, then I'm not sure what else I can say.
This is what fuels exponential growth of nations. Banks keep conjuring up money out of thin air and loaning out to people so they can work and extract value out of this planet at unsustainable exponential rates. Humanity is addicted to it. The second these loans become unavailable for any reason, everything comes crashing down. The economy literally grinds to a halt.
Worst of all is these banks essentially dictate the direction future society will take. They choose who receives loans and who's left out in the cold. People like Larry Fink, CEO of BlackRock and manager of 10 trillion dollars. They decide things and then say "will you lead, or will you be led?"
Perhaps you're getting hung up over physical bank notes. If most people and companies hold most of their money as numbers in bank accounts and do most of their buying and selling by moving numbers between bank accounts, why is it only cash that matters?
The money is the numbers the banks report to you. Multiplying those numbers is inflating the money supply. Yes they might be required to hold some other assets than simply numbers in their databases to start the whole process, but they can still multiply money to some degree.
The problem is banks operate in a state of perpetual insolvency. Their ability to pay off their debts to customers depends on the state of the larger economy. Too many defaults and the whole thing comes crashing down.
> At no point is cash conservation broken.
It never existed to begin with. All that's required for the illusion to disappear is for enough people to attempt to withdraw funds at the same time.
> I know that the bank has plenty of other peoples’ $900 that if I wanted that cash I could take it.
The bank has money until it doesn't.
https://en.wikipedia.org/wiki/Bank_run
> Many of the recessions in the United States were caused by banking panics
> The Great Depression contained several banking crises consisting of runs on multiple banks
> The global financial crisis that began in 2007 was centered around market-liquidity failures that were comparable to a bank run
https://en.wikipedia.org/wiki/Financial_crisis_of_2007–2008
> The International Monetary Fund estimated that large U.S. and European banks lost more than $1 trillion on toxic assets and from bad loans
> Lack of investor confidence in bank solvency and declines in credit availability led to plummeting stock and commodity prices
> The crisis rapidly spread into a global economic shock, resulting in several bank failures
> The de-leveraging of financial institutions, as assets were sold to pay back obligations that could not be refinanced in frozen credit markets, further accelerated the solvency crisis
> governments and central banks provided then-unprecedented trillions of dollars in bailouts and stimulus, including expansive fiscal policy and monetary policy to offset the decline in consumption and lending capacity, avoid a further collapse, encourage lending, restore faith in the integral commercial paper markets, avoid the risk of a deflationary spiral, and provide banks with enough funds to allow customers to make withdrawals
People complain about Tether but the whole banking system is just Tether on steroids.