RE: WHY TOMORROW IS SO EXCITING AND SCARY? AND SO IMPORTANT FOR CRYPTO?
How? I guess Im not everyone as I really dont know how to fight with bank runs (limiting withdrawal is not a solution as it will only give more ammo to protesters).
How banks work essentially.
There are banks and there is a central banks which surpervises them.Lets assume that CB only need to preserve mandatory reserve ratio. Imagine you put 1000 usd at deposit ant mandatory reserve ratio is 10%, so the bank needs to put 100$ to a special account in CB and could issue credits on the rest. The deposits come and go and credits come and go and what a bank must preserve is that his reserves in CB be no less than 10% of his credits. Okay.
Now yellow wests come and start to massively withdraw their funds from a bank, so that bank is dangerously closing to 10% treshold. What next?
I see 2 options for a commercial bank.
- Call to CB: «Guys, we have a problem here. These yellow wests make us close to 10% mandatory reserve ratio. Could we pause these ratio restrictions for a while please?» And CB answers Yes, just because he doesn’t want problem to emerge.
- Same as first, but CB answers «No. But if you issue short-term bonds for recharging your capital balance, we will buy them.» A little paperwork and problem is solved.
So there is no real problem here for a bank.
Dear @cryptoheroes
Thank you for your amazing comment. I appreciate your time and effort.
Thank you for sharing your knowledge with me. I wonder if it will all really play out the way you said. I think that current events will not bring any bank down, but as result most of those banks will lose their money flow.
And having difficulties with money flow = very difficult time for company. So it is sort of a big problem as well.
ps.
I was just wondering lately, why you didn't ever post anything on Steemit. Your comments are very mature and valuable, and yet you're not publishing any of your own work? Unique.
Yours
Piotr