Economic Crash: Distrust and Bank Runs

The United States government has just approved and is now implementing a 1.9 trillion USD stimulus package. The package includes 350 billion dollar aid to state and local governments as well as $1,400 USD checks to most Americans.

This bill is incredibly polarizing in its makeup. On one hand I am incredibly happy that millions of Americans will be getting money to help with their rent/living expenses who were previously struggling. On the other hand, we just pumped almost 2 trillion dollars into our economy mostly out of thin air.

In my mind, a huge problem is on the horizon. The US government currently requires most banks to hold only 10% of their deposits in liquid form. The other 90% is used to manufacture loans and interest-hungry programs that bring in millions of dollars in profit to the banks annually. If we pump trillions of dollars into the economy, it is my assumption that we are not creating trillions of physical US Dollars to back that up.

We are putting our banks at risk for what is called a "bank run". A bank run is essentially a rapid spread of fear where bank customers go to banks in large volume demanding liquid withdrawals and are mostly turned away empty handed as the banks simply don't have the liquidity on hand. As more money enters the economy, prices of everyday goods will increase and people will need access to more money (supply and demand).

If people begin taking note of this, they will want increased access to their money and though people can still technically use their debit cards to make purchases, cash is still king in America; people will want their money in their hands.

When trust is put into a financial institution, that trust is incredibly fragile. As we saw in Cyprus in 2013, when the government places financial pressures on their nations bank's we can find devastating results; money taken from accounts, accounts frozen, withdrawals made impossible, money becoming inaccessible. If banks in the United States experience a bank run in the coming months or years, citizens may find themselves stuck in terms of their own financial liquidity.

What is the solution?

Currently, this type of thinking is viewed as very radical and extreme. The United States is still the world's financial powerhouse and who is really going to step up and call us out for this stimulus? For now, the word of America's financial system carries enough weight to keep our banks in positive view. But one day, it won't. One day people are going to realize that there is nothing backing the value of the US Dollar except the word of the government. Money is a very abstract concept and it's all about utility. The solution is cryptocurrency. No bias in this statement.

Taking the government out of money requires that the currency has some tangible utility to survive. Bitcoin does not require the US government to assign it value, its value is based on its utility, scarcity and universal applicability. Bitcoin is always accessible and does not take banking holidays. If you own your coin and your keys, you are your own banker and there is no rush to the ATM to stay alive for the next week.

In my opinion, we need universally accepted cryptocurrency to guarantee the physical and financial safety of human beings. Ironically and contrary to many claims about cryptocurrency, I believe it is safer than fiat. Fiat is a gamble, cryptocurrency is inevitable.

This is not financial advice, but every fiat currency ever created has failed. Don't bet your financial future on the survival of a nation, none of us can predict the future.

Sources:
https://www.theatlantic.com/business/archive/2013/03/everything-you-need-to-know-about-the-cyprus-bank-disaster/274096/

https://www.washingtonpost.com/business/2021/03/10/what-is-in-the-stimulus/

https://www.investopedia.com/terms/f/fdic-insured-account.asp

@mariosfame Thanks again for this gif:

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