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Modern Banks Are Dealing With An Ancient Problem
The infamous bank run
If you find the current “banking crisis” confusing, you are not alone. The news is a mish mash of contradictory statements. On the one hand, the Federal Reserve and financial analysts say that everything is fine. On the other hand, there is a parade of headlines declaring that regional banks are trembling under the weight of a very old banking problem — the bank run.
Despite centuries of policies and safety nets, people have still failed to find a reliable solution to an age old problem. What happens when everyone wants to take their money out of the bank at one time? Bank runs are not as common as they once were, but the current banking situation shows us that modern banks continue to grapple with this lingering issue.
What is a bank run? And why can’t banks navigate the system when such things happen? It is all based on how the banking system operates and how much money each institution keeps on hand.
The Idiot’s Guide To Banking
Unlike many people online, I do not profess to be a financial expert by any means. I do, however, have a tenuous grasp of how the system works and why bank runs are so dangerous.
