A Run on the Bank
We live in a factional reserve banking world, where only a fraction of the money that is created exists as cash. All the money from your paycheck gets deposited as numbers in a bank account, backed by cash, allegedly. You can withdraw cash from your account, and even take out all the money.
The problem is if everyone wants to take money out at the same time. As more people take money out, the solvency of the bank diminishes, where the promissory ability to pay people in cash for the money listed in their bank accounts is reduces. The ability to provide long-term financial obligation in the form of cash to more people goes down.
If people distrust the financial markets or economic situation, they may want to get their money out. If the other people will be trying to get their money out of the bank, they may try to get their money out too. This increases the risk of insolvency for banks.
Banks have presumably 10% of the money they create through loans and have on deposit, actually in the bank, maybe. It might be even less. Lets say everyone has the same amount of money in a bank, either from their paycheck or from a loan, and 2% of people try to withdraw all their money. The bank should be able to cover the cash withdrawals. But, if 20% try to withdraw all their money, then the bank can’t cover those withdrawals. Then the bank become insolvent.
The word spreads that the bank can’t cover withdrawals, even though they are legally obliged to. People lose trust in the bank, and want their money, they don’t want to lose it to a failing bank. So more people go to demand their money back. This is a run on the bank.
Laws have recently been passed in the European Union and elsewhere, like Canada, where banks can prevent withdrawals in a crisis, and even apply negative interest to charge people for having money in the bank.
When you put money in a bank account, you are trusting a bank to let you withdraw it. But then they own your money, not you. They can prevent you from taking money out in order to protect the illusory house of cards that the whole system is built upon. If everyone tried to withdraw all their money from a bank, the bank crashes and no one gets their money. Where is your money then? It’s nowhere. It’s gone. They stole your money from you in the end.
This deception is not understood by most people. The money magic game is being played, and we all let it be played because we need to put our money somewhere. So it goes into banks, and then they create money out of thin air through fractional reserve banking. They can create 90% times more money than they have in actual deposits from people who put their paychecks into accounts. Then when they create a loan, that loan gets deposited into an account and they can create 90% more money form that. Only 10%, a fraction of 1/10 is kept on reserve as money that comes from somewhere real.
The profits are made from the interest they charge for loans, for money that isn’t even there to begin with. If a bank only held deposited money and was not able to create any loans and invent money, then there wouldn’t be fractional reserve banking, and they would have 100% of the money that was deposited into it. Then they could cover all the cash withdrawals requested. But that’s not how things operate.
Our money is being used for them to generate huge profits. Billions of dollars in profits each year. And yet, if we want our money out, we can be prevented from taking it out, and we can even lose all our money because of the money-magic illusion and deception that they profit from. It’s an open conspiracy, right in our faces.
As for cryptocurrencies like Steem, you can make a run on Steem and withdraw all the token, but it doesn’t fail unless everyone tries to sell it all. Then the price would just plummet as people are trying to get whatever they can before they think it will fall lower, and lower, and lower. This would just make the price go lower, until no one wants to buy it. But then that’s when the rich usually buy things low and then the price goes back up, and they can sell it when it’s higher to make profit.
Often that’s what happens. It happened in the 1930s for the Great Depression. Rich manipulators started a selling off, the FUD (fear, uncertainty, doubt) grew and more people started selling. Then when things crashed, the rich bought up everything super cheap because they had the money to do so, since they already had money and also sold when the value was higher. That’s why you buy low and sell high to make money. Others who sell in FUD when the price gets lower and lower will end up losing, and those who sold high and then buy low make money when the value goes back up.