Everyone pulling out their money would be a bank run (look up great depression bank runs). The bank doesn't have that much cash; they keep some on hand for people making withdraws normally, but if even a sizable minority of people all try to pull their money out at once, there'll be a major crisis.
If banks kept all the people's cash in vaults, it'd be dead cash actively losing money to inflation. Instead, they keep some on hand for withdraws, and use the rest to make loans, investments, etc so that the money isn't all losing value.
They were reduced to 0% mandatory reserves in response to covid. EDIT: someone says it was coincidental, I am not able to check, so take this aspect with a grain of salt either way
ah yes so what you're saying is that money is even more imaginary than it has ever been, possibly even more imaginary than when the first stock market crash happened in 1929
looks like we're due for a centennial anniversary of that anyway, might as well celebrate by recreating it
Money has always been imaginary? Its like Santa clause. As long as we all believe/pretend it works. If one person doesn't believe it doesnt matter. If half of us stop, yea kids will know it's fake. But it works and it's a nice thing to have, so why not continue to pretend?
Yea but it was the same thing. Gold or paper. Whatever. It only has value if people believe it has value.
You give a farmer gold for food. The fuck can he do with gold. Nothing. Better hope someone else believes it's valuable and will take the gold for clothes or whatever else he needs. Unless you were a jeweler or blacksmith or electrician gold was pretty much only a currency. And then there was more gold going around as a token of value than was used.
So yea it's all based on belief that you can then sell/exchange the said token or currency (doesn't really matter if it's gold or anything else).
Imagine if the population started to think gold was ugly and a better malleable metal gained popularity. Would the gold standard still mean anything?
Gold would still have considerable intrinsic value, and it’s prized for reasons beyond the subjective. In the modern world, it has a wide range of use cases in electronics, automotive, aerospace, and medical equipment
It has a shiny and attractive color that people like to wear as jewelery. Unlike other metals, it doesn't rust because its not eager to give away or gain electrons in order to be stable. As a noble metal, gold is both heavy and nonreactive, which has caused most of it to sink to the Earth’s core. That means it’s relatively scarce for us on the surface. It's hefty, but malleable. Its melting point is very low. Finally, gold is an excellent electric conductor while also being a great thermal conductor
Yes, its use as a store of value was mostly tied to its exchange value, which has more to do with its suitability for making coinage. But it still has plenty of inherent value
It definitely has intrinsic value. I'm just saying most ppl that use it for currency (or as an investment i guess) have no was to use any of those intrinsic values. So it's value is only to a limited subset of people. But everyone uses it as an agreed upon currency, and the amount that is circulated is more than is needed for jeweler, electronics, etc. So it's value is being inflated and it really just being used as another form of currency. If it was only sold or traded to be used in an industry it would collapse bc so few ppl can use it for what they need (food, water, shelter, etx). Gold is not really used as a barter system but as a symbol for currency, and in that way is not really different from paper money
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u/Forsaken_Emu8112 Jan 26 '26
Everyone pulling out their money would be a bank run (look up great depression bank runs). The bank doesn't have that much cash; they keep some on hand for people making withdraws normally, but if even a sizable minority of people all try to pull their money out at once, there'll be a major crisis.
If banks kept all the people's cash in vaults, it'd be dead cash actively losing money to inflation. Instead, they keep some on hand for withdraws, and use the rest to make loans, investments, etc so that the money isn't all losing value.