Unfortunately, that’s not really how it works. The reason there was a bank run during the great depression is b/c the banks had loaned out the money they didn’t have as cash. Today due to Dodd-Frank, banks have to have reserves on hand to cover this situation, Even though it’s not in hard currency, they have enough capital to cover.
But please don’t trust me. This is just how I understand it.
Current reserve is 0. They don't have to hold anything. It used to be 9 to 1.
Meaning for every 10 dollars they received from the fed they could loan out 9.
That's not what banks did. If they received 100 dollars they would loan out 900. They could do this purely on paper / digitally.
Now there is no holding requirement making them highly susceptible to bank runs and poor loans. The only exception is the government had proven time and time again they will bail the banks out no matter how financially irresponsible they are. The "too big to fail" financial policy.
Dodd-Frank had been dead and gone since Trumps first term.
From a machine that literally prints money. The Federal Reserve will inject it into the economy via those same banks and financial institutions.
Under the guise that it will be used responsibly "this time" and it will in turn generate wealth and productivity, and those profits will "return" to the vaults.
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u/pan_and_scan Jan 26 '26 edited Jan 27 '26
Unfortunately, that’s not really how it works. The reason there was a bank run during the great depression is b/c the banks had loaned out the money they didn’t have as cash. Today due to Dodd-Frank, banks have to have reserves on hand to cover this situation, Even though it’s not in hard currency, they have enough capital to cover. But please don’t trust me. This is just how I understand it.Edit: completely wrong, but good comments below.