but wait there's more
if you borrow $1000 in the first place and put it in your account, the bank can then use that money as a deposit to loan out another thousand dollars! Literally infinite money glitch at 0%
I blame the tik tok guy with all the bullshit charts explaining how we’re about to collapse. Give me some good old fashioned doom because you bought puts
It’s amazing how so many morons can live their entire lives blissfully unaware of how anything works, learn about how something works out of context by some bloviating idiot on social media, and then immediately catastrophize that the entire system is going to collapse because no one but them, who just learned how this thing works, could’ve possibly had the foresight to account for the risks with institutional safeguards. Like for real, just continue to bumble through life with zero curiosity or critical thinking. It’d be better for everyone.
Except the people who you would think would have recognized the Bernie madoff scam, or theranos, or the 08 recession, or the savings and loan crises, or that blockbuster would surely fail, just…. Didn’t. So her opinion is really as good as any of the so called professionals.
what you're saying is true to a certain extent but institutions and the professionals in charge of such safeguards themselves often have trouble fully understanding the convoluted system that they (or more accurately, their predecessor) created. the bank run that almost brought the collapse (or it pretty much did collapse it, only for monpolized banks to gobble it up) SVB is such a great example of this where the people who managed the money did EXACTLY as the Fed required, only to have found themselves getting absolutely assfked by bonds because the Fed fks you and because of the mistake of their lax stance on non fdic insured accounts. It caught alot of people off guard bc SVB was actually such a safe bank that were quite conservative with their handling of the money.
So yes, there are safeguards, but no, the system itself is not bullet proof and honestly is a lot more fragile than most people (even professionals) would want to believe.
But it’s not 0 like this lady is implying lol. Still terrible and is a practice that shouldn’t be allowed, yet it benefits the growth of the economy through loans. With high credit usage now, i think the percentage should be higher, but nobody gives a shit
The requirement is 0% as of ~2020. The fed changed it in response to Covid-19 as a show of faith, but functionally banks have not been lending out the maximum since 2008 out of fear of exactly what this user implied.
if a bunch of people tried to withdraw their money at the same time the banks would be insolvent. this has happened in the past, most recently 1 year ago.
It was only artificial in the sense that all their clients were VC investors which could read financial statements and knew there was a possibility of a run if every other client was like them and could understand those statements. Which they were.
Or if their depositors decided to move their money to something with a higher yield.
It's all very good to say, oh we're solvent if we can hold to maturity these billions of dollars of 30 year treasuries we bought at 1%. But what are you doing to keep your depositors at your bank? If you have to raise your rates to keep them there, you're not fixing that hole in your balance sheet.
I, too, can make back billions of dollars of losses with a sufficiently large zero interest loan.
>was pretty much artificially triggered
Agreed
>in order to be acquired for cheap by the big fish.
I disagree. Buying long term bonds as they did was a big mistake. Having a shitty portal for customers was a big mistake.
Large customers unable to verify that transfers because you have a shitty portal freaks them out. They make noise and move their money out threatening your liquidity.
The you wake up in the morning and hear that your bank is selling bonds at an 8% discount to raise cash... and the first thing you do is transfer shit out.
Banks' #1 responsibilities are to maintain stability AND appear to be stable. They failed miserably at that latter responsibility.
This is called bad administration, the bank new very well that they were dealing with a volatile industry and should have more liquidity, I don't think that they were stupid but somewhere they chose the path of high risk and pay for it, just like we do at Wendy´s
SVB was insolvent. The value of their assets was less than the value of their liabilities. If their issue was only a liquidity issue and not a solvency issue, then they could have survived had they been provided a loan.
>they had good reserves but tied in government bonds which they would have had to sell at a loss to cover
Those government bonds were billions of dollars of 30 year treasuries they bought at 1% interest rates, and interest rates were raised to 5%. Unrealised losses are still losses.
SVB was incredibly unique due to their clients. Over 90% of their deposits were not FDIC insured and a good percentage of them weren't even collecting interest. SVB had zero consumer exposure which in the case of a bank run, can provide something of a backstop (see NYCB) against a bank run. SVB's clients had hundreds of millions with them so if one client goes, so does that few hundred million. If hundreds of clients of SVB go, well, that's how they ended up where they were.
I'm kind of amazed that a year later, people just cite SVB to ignite some fears but don't understand what happened and why it happened. I still people say SVB was involved with crypto, risky lending, and was investing in all these shady securities.
Banks default almost every year. It’s a “feature” of fractional reserve banking when there’s volatility in markets. 5 defaulted last year compared to 157 in 2010. There have been 0 so far this year. It doesn’t take much of a “run” to get to your 10% deposit requirement even outside of the COVID rules.
It varies by the size of the bank. [From the federal reserve:](https://www.federalreserve.gov/monetarypolicy/reservereq.htm)
> The dollar amount of a depository institution's reserve requirement is determined by applying the reserve requirement ratios specified in the Board's Regulation D (Reserve Requirements of Depository Institutions, 12 CFR Part 204) to an institution's reservable liabilities (see table of reserve requirements). The Federal Reserve Act authorizes the Board to impose reserve requirements on transaction accounts, nonpersonal time deposits, and Eurocurrency liabilities.
> Prior to the change effective March 26, 2020, reserve requirement ratios on net transactions accounts differed based on the amount of net transactions accounts at the depository institution. A certain amount of net transaction accounts, known as the "reserve requirement exemption amount," was subject to a reserve requirement ratio of zero percent. Net transaction account balances above the reserve requirement exemption amount and up to a specified amount, known as the "low reserve tranche," were subject to a reserve requirement ratio of 3 percent. Net transaction account balances above the low reserve tranche were subject to a reserve requirement ratio of 10 percent. The reserve requirement exemption amount and the low reserve tranche are indexed each year pursuant to formulas specified in the Federal Reserve Act (see table of low reserve tranche amounts and exemption amounts since 1982).
As of January 1, 2024:
Low reserve tranche amount = $644.0 Million
Exemption amount = $36.1 Million
So if a bank has less than $36.1 Million of loans, then the reserve amount is zero. If the bank has between 36.1 and $644 Million, the reserve amount is 3%, and if the bank has above $644 Million, then the reserve is 10%.
Gives me 10k BC vibes when we agreed to accept stones as our currency, yet the third tribe found a lot of those stones around and crashed our local economy. We had to go back to berry picking for a decade.
Every year WSB re-discovers like one of the most basic and econ 101 concepts , fractional reserve banking.
Next someone will post that "balance sheets" actually balance !
MIND BLOWN!
I wonder what very basic topic you guys will discover next?
https://www.federalreserve.gov/supervisionreg/large-bank-capital-requirements.htm
They're mostly using capital ratios rather than reserve requirements now.
Banks need to hold at least 7% of their capital as equity, and more if they're invested in riskier assets, to serve as a buffer before the depositors or bond holders get hit.
Because my brain has as many ripples as a cue ball and my googling skillz are weak and pathetic, how does this compare to requirements in 2019, and if you’re feeling spicy, 2012 and 2007 as well?
Not much different, but banks must now comply with Basel III regulatory capital ratios which use ‘risk-weighted assets’ as the denominator. The regulators are much more involved in this calculation. Essentially, riskier loans now require more capital to be pledged against them. Operational and market risk require separate capital to be held against them. Concentration limits are in place. Overall, most developed markets have banking sectors that are much more sound than they were prior to the global financial crisis.
Currently, I think the US and German banking sectors are absorbing ~20% declines in commercial real estate values and seeing very little systemic issues (NYCB withstanding). This would have been unheard of in 2010.
You should be downvoted to oblivion if you come in here with inflammatory posts and don't even know what the counter argument *is*, much less how to counter the counter. Nobody made him post this.
*He*'s the OP. Sorry but if you're gonna need to ask follow up questions, maybe you should hold off on creating the post? I'd agree with you if he were some random other user trying to learn.
In todays society, people will go “I’m just asking questions 🤔🧐 why am I being silenced???”
Same kids who didn’t bother to pay attention in school and think the teachers had it out for them.
Sarah will have pledged her assets as collateral to the bank, and even if they didn’t take collateral up front courts in bankruptcy side with creditors like banks over others.
*edit*: in theory a bank underwriting officer could loan to someone with no collateral in place or a collateral agreement, but that would be a WSB alumni acting as the underwriter
Cant be dangerous, because historically daddy fed prints that 100k. Problem solved, 100k made out of nothing.
It’s like when I plant a tomato seed. One seed turns into 50k tomato seeds. Mother Nature at work.
No. Most of the money that a bank loans out is secured with a lien against assets
The OOP is using loan and withdrawal interchangeably when they are not the same thing.
Many countries don't have reserve requirements anymore because they are redundant if you have strong capital requirements. If banks need liquid cash they can always borrow from the central bank as they routinely do. As long as they have enough capital to support their balance sheet, there's no reason for the central bank to refuse to lend to them short term cash.
So capital requirements can effectively replace liquidity requirements. Liquidity requirements are just a relic from a time before capital requirements and electronic transactions.
In the example you gave, if Sarah has good credit and the bank has enough capital to cover the risk that she defaults, there's no issue for the bank to let them both withdraw 100k. The extra 100k will be liquidity provided by the central bank, and the commercial bank will just have a loan asset of 100k to Sarah and a liability of 100k to the central bank.
Yeah you live in a society based on trust. As long as John and Sarah trust eachother, banks and society as a whole will function great and nothing bad will happen
A few years ago I wanted 30k cash to buy a truck, I had to go to 6 different banks on a Friday afternoon to get all the cash together. This was US Bank. After that bullshit, I closed all my accounts with them and went to a couple local credit unions
That's confusing required reserves, which indeed went to zero, with actual reserves wanted by banks.
A lot of countries have had 0% reserve requirements for a while, and no catastrophe occurred.
Naaah
All banks are like this. Theoretically speaking, if like 40 or 50% of people pull there money simultaneously out of banks like bank of America it'll collapse the bank.
Most of the money Is tied up. And this percentage varies by bank. But no bank has a 1 to 1 hold of liquid assets per savings accounts.
Comrades struggling to gin shit up after blowing their whole load in 2016.
Yeah, this feels exactly like 2008. Almost identical. Nothing is different, really, 2024 = 2008, comrade, you nailed it.
Instead of ignoring the Fed, I now understand they are a symptom of our foolish capitalist government!
Alexei who, eh?
I feel like a lot of these popular subs are being overrun with either bots or terminally online incels. Check out OPs history, dude worships Jordan Peterson lmao
Yes. This is as scary as it sounds, and it just happened 1 year ago with the SVB bank fallout. Everyone went to pull money out when tech was taking a beating and they shut the bank down. Imagine your money is in a bank, and they screwed up how they do business so you can't access your money. This why Balaji is talking about bank runs being a major catalyst for the bitcoin and crypto markets. No middle man necessary, and they can't loan out what they don't have access to.
Consolidation of banking. Banks distribute currency. Our currency is abt to change. The roll out will be easier with less distributors aka banks. If CEO of JP Chase sold stock for 1st time in decades, implemented AI to reduce the need of humans, and on top of that is talking about a 3 day work week....that's one of the sector leaders showing you they got leaner and are preparing for something. Also I could be totally wrong. I have alerts set to short regional small banks.
wait. why would she go to take out the money from the bank? if Sarah gets the money, it's because it's already loaned to her, and she has it. so if John goes to the bank and withdraws his money, would they have it at hand?
Well yeah, that's how it's been for ages... The loans that people get are money created from thin air. That's why rising interest rates is a tool to curb inflation : people take out less loans... And also pay more interested in real hard-earned money.
YO OP, Sarah took a loan… meaning she *owes* the bank 100k and probably done with a collateral.
She misses one payment, bank seizes and sells her collaterized asset, takes their 100k loan plus interest.
The bank isn’t going to give her another 100k.
You and this Crypto Tea person is so regarded I’m not sure we have a spot for you both.
Reserve requirements have never constrained lending. I believe Canada has not had a reserve requirement in a very long time. If the bank reserves ever ran low, they can borrow more from other banks or as last resort from the central bank.
The actual limit to lending is the capitalization ratio. These limits are set by the Basel Accords.
I wouldn’t jump to any conclusions. The major banks all still have to abide by the Federal Reserve’s liquidity and stress testing requirements. SVB failure was an additional driver of new initiatives in the liquidity funding space to ensure greater stability.
If you’re interested:
https://www.federalreserve.gov/newsevents/speech/barr20231201a.htm
At least you will have your money regardless, insured.
Go buy a Bitcoin and be at the mercy of some whales who decide the price.
I am with Banks and US dollars.
Doesn’t mean much considering banks collect interest on reserve balances via the fed, it’s the policy rate. Banks have plenty of incentive to hold ample reserves, that’s why we’re in a ample reserve economy durrrr
Sarah doesn’t have 100k, Sarah is in 100k of debt. The bank owes John 100k, but Sarah owes the bank 100k. They aren’t making cash out of nothing, unless they mean the interest.
Although that said, money as a whole is pretty much made up. The government can just magically print more.
Josh and Sarah will be covered by Shanayvia or Archibald’s accounts. And so on so forth.
So we are good don’t you worry too much and don’t ask too many questions ….
https://preview.redd.it/0iztn3txkdqc1.png?width=1080&format=pjpg&auto=webp&s=e5a00df3a15eadf8b50bf04632ac5f9a58a7d84e
We can print more and give it to the banks
This is inaccurate.
Capital requirements require a bank to have adequate capital, cash on hand, and excess to that requirement, at the Fed. All banks must have a 4.5% capital base + a 2.5% "stress capital" requirement, with the "too big to fail" banks required to hold an additional 1%. This action eliminated the requirement to hold the reserves at the Fed, which paid no interest, thus was a de facto tax on the bank.
[https://www.federalreserve.gov/supervisionreg/large-bank-capital-requirements.htm](https://www.federalreserve.gov/supervisionreg/large-bank-capital-requirements.htm)
Not really, because this is why the FDIC was created, both John and Sarah will get their money eventually. The problem is that, when the media makes a news story out of it they portray as “the bank has no money” and people freak out and all pull their money from multiple banks at the same time, which runs the risk of depleting the FDIC fund (which theoretically shouldn’t be possible, but absolutely is) and is certainly disastrous for the individual banks, as aside from vandalism and rioting, depending on how they’ve invested deposits it could very well lead to the bank going out of business and, if it is publically traded, its stock plummetting to zero, which can lead to federal takeovers. We’ve seen many examples of all of this over the past couple decades (and this is, of course, as simplified as the offered example was). This is also where the “too big to fail” excuse to bail out the banks came from; sloppy management led to poor investing/high risk loans with some of the biggest institutions because they knew the government would never let them collapse due to the effect it would have on the overall economy.
The bigger threat in a full on societal bank run like we almost saw in…2007? 2008? Can’t remember. Anyway, the bigger risk is devaluing the currency itself as bank crashes lead to market crashes. Something similar happened in Germany in 1923, where there currency became so devalued it was cheaper to wallpaper your house with it than to buy wallpaper. I remember a friend asking me if he should pull all his money out of the bank back in 08 and I told him not to bother; records are all digitized now so your balances up to $250,000 per customer per institution are “secure” as such, and any eventuality that would lead someone to pull their cash would also contribute to that cash being worthless, so it actually makes more sense to leave it. Unless you were immediately converting it to another commodity, but in most cases in the modern era you can use your debit card to do that.
Should we allow banks to hold 0% reserves? There are pluses and minuses to the system. But it’s where we are, and it’s nothing to freak out about (because by the time it’s worth freaking out it’s too late anyway). IMO? A bank should have enough liquid capital to meet the FDIC coverage amounts per customer minimum, but I also don’t think it needs to be on site, just as long as it’s not invested (see the silicon valley bank failure for more on that).
Disclaimer: I am not an economist or a banker, this is all “to the best of my knowledge”, so I may not be 100% accurate but that is my basic understanding of it.
what if none of this mattered because it's all just numbers in computers anyway? Shock, right? It's almost as if bank runs were the result of arbitrary rules and the people withdrawing. Now are the rules well intentioned... yes. Do bad things happen if the rules are not followed - yes and no - mixed bag. Can bank esplode still - yes - all depends on who intervenes.
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Weekends are a trip around here
All the “Life of the party” friends come out of hiding
but wait there's more if you borrow $1000 in the first place and put it in your account, the bank can then use that money as a deposit to loan out another thousand dollars! Literally infinite money glitch at 0%
I blame the tik tok guy with all the bullshit charts explaining how we’re about to collapse. Give me some good old fashioned doom because you bought puts
Lol don't Google fractional reserve banking or you might see what they mean by a reserve percentage.
It’s amazing how so many morons can live their entire lives blissfully unaware of how anything works, learn about how something works out of context by some bloviating idiot on social media, and then immediately catastrophize that the entire system is going to collapse because no one but them, who just learned how this thing works, could’ve possibly had the foresight to account for the risks with institutional safeguards. Like for real, just continue to bumble through life with zero curiosity or critical thinking. It’d be better for everyone.
Too many big words, should I buy or sell my bitcoin?
Sell and invest all you’re money into BlockBuster coin
Blockbuster doesn't even trust me to take home a video case. I'm not buying their coins
It hasn’t been a blockbuster year for me. My blockbuster stock is down.
Take a loan out against it, get as leveraged as you can and go long on the Argentinian peso
To be fair, I could see how someone could live through the shenanigans of the 2000s and then become a lifelong cynic about our entire financial system
Dunning-Krueger
Except the people who you would think would have recognized the Bernie madoff scam, or theranos, or the 08 recession, or the savings and loan crises, or that blockbuster would surely fail, just…. Didn’t. So her opinion is really as good as any of the so called professionals.
OP is the smartest Jordan Peterson enthusiast.
And the tallest midget
So we're all fucked is what you're saying?
what you're saying is true to a certain extent but institutions and the professionals in charge of such safeguards themselves often have trouble fully understanding the convoluted system that they (or more accurately, their predecessor) created. the bank run that almost brought the collapse (or it pretty much did collapse it, only for monpolized banks to gobble it up) SVB is such a great example of this where the people who managed the money did EXACTLY as the Fed required, only to have found themselves getting absolutely assfked by bonds because the Fed fks you and because of the mistake of their lax stance on non fdic insured accounts. It caught alot of people off guard bc SVB was actually such a safe bank that were quite conservative with their handling of the money. So yes, there are safeguards, but no, the system itself is not bullet proof and honestly is a lot more fragile than most people (even professionals) would want to believe.
Sure, that’s fair. At the same time I’ve never learned a single thing about banking or economy that *doesnt* make the whole thing sound like a scam.
But it’s not 0 like this lady is implying lol. Still terrible and is a practice that shouldn’t be allowed, yet it benefits the growth of the economy through loans. With high credit usage now, i think the percentage should be higher, but nobody gives a shit
The requirement is 0% as of ~2020. The fed changed it in response to Covid-19 as a show of faith, but functionally banks have not been lending out the maximum since 2008 out of fear of exactly what this user implied.
if a bunch of people tried to withdraw their money at the same time the banks would be insolvent. this has happened in the past, most recently 1 year ago.
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It was only artificial in the sense that all their clients were VC investors which could read financial statements and knew there was a possibility of a run if every other client was like them and could understand those statements. Which they were.
Or if their depositors decided to move their money to something with a higher yield. It's all very good to say, oh we're solvent if we can hold to maturity these billions of dollars of 30 year treasuries we bought at 1%. But what are you doing to keep your depositors at your bank? If you have to raise your rates to keep them there, you're not fixing that hole in your balance sheet. I, too, can make back billions of dollars of losses with a sufficiently large zero interest loan.
>was pretty much artificially triggered Agreed >in order to be acquired for cheap by the big fish. I disagree. Buying long term bonds as they did was a big mistake. Having a shitty portal for customers was a big mistake. Large customers unable to verify that transfers because you have a shitty portal freaks them out. They make noise and move their money out threatening your liquidity. The you wake up in the morning and hear that your bank is selling bonds at an 8% discount to raise cash... and the first thing you do is transfer shit out. Banks' #1 responsibilities are to maintain stability AND appear to be stable. They failed miserably at that latter responsibility.
This is called bad administration, the bank new very well that they were dealing with a volatile industry and should have more liquidity, I don't think that they were stupid but somewhere they chose the path of high risk and pay for it, just like we do at Wendy´s
This is correct. Thank you.
SVB was insolvent. The value of their assets was less than the value of their liabilities. If their issue was only a liquidity issue and not a solvency issue, then they could have survived had they been provided a loan. >they had good reserves but tied in government bonds which they would have had to sell at a loss to cover Those government bonds were billions of dollars of 30 year treasuries they bought at 1% interest rates, and interest rates were raised to 5%. Unrealised losses are still losses.
Yeah happened with SVB but guess the funny part ? SVB resumed lending after fed bailed them out (before final shutdown) LOL
if every depositor went to go get their money at the same time every bank would fail. thats literally how banks work.
SVB was incredibly unique due to their clients. Over 90% of their deposits were not FDIC insured and a good percentage of them weren't even collecting interest. SVB had zero consumer exposure which in the case of a bank run, can provide something of a backstop (see NYCB) against a bank run. SVB's clients had hundreds of millions with them so if one client goes, so does that few hundred million. If hundreds of clients of SVB go, well, that's how they ended up where they were. I'm kind of amazed that a year later, people just cite SVB to ignite some fears but don't understand what happened and why it happened. I still people say SVB was involved with crypto, risky lending, and was investing in all these shady securities.
Banks default almost every year. It’s a “feature” of fractional reserve banking when there’s volatility in markets. 5 defaulted last year compared to 157 in 2010. There have been 0 so far this year. It doesn’t take much of a “run” to get to your 10% deposit requirement even outside of the COVID rules.
It's not 0% anymore, it's a percentage of capital. It used to be 0%. Don't take betting advice from some guy posting 4 year old news.
yeah, its all just numbers on a screen, who cares.
Yeah I thought it was 20% or something, 0%?? Wtf
I think "fractional reserve" was like single digit percent not 20%
Holy fuck this does look true. I've seen multiple sources saying it's now 0%, looks like prior to 2020 it was 10%.
Pretty sure large banks still have to pass stress tests by the fed.
It varies by the size of the bank. [From the federal reserve:](https://www.federalreserve.gov/monetarypolicy/reservereq.htm) > The dollar amount of a depository institution's reserve requirement is determined by applying the reserve requirement ratios specified in the Board's Regulation D (Reserve Requirements of Depository Institutions, 12 CFR Part 204) to an institution's reservable liabilities (see table of reserve requirements). The Federal Reserve Act authorizes the Board to impose reserve requirements on transaction accounts, nonpersonal time deposits, and Eurocurrency liabilities. > Prior to the change effective March 26, 2020, reserve requirement ratios on net transactions accounts differed based on the amount of net transactions accounts at the depository institution. A certain amount of net transaction accounts, known as the "reserve requirement exemption amount," was subject to a reserve requirement ratio of zero percent. Net transaction account balances above the reserve requirement exemption amount and up to a specified amount, known as the "low reserve tranche," were subject to a reserve requirement ratio of 3 percent. Net transaction account balances above the low reserve tranche were subject to a reserve requirement ratio of 10 percent. The reserve requirement exemption amount and the low reserve tranche are indexed each year pursuant to formulas specified in the Federal Reserve Act (see table of low reserve tranche amounts and exemption amounts since 1982). As of January 1, 2024: Low reserve tranche amount = $644.0 Million Exemption amount = $36.1 Million So if a bank has less than $36.1 Million of loans, then the reserve amount is zero. If the bank has between 36.1 and $644 Million, the reserve amount is 3%, and if the bank has above $644 Million, then the reserve is 10%.
This is like that except rather than dividing the money supply by the reserve rate to get the monetary max, you divide by zero.
Nearly all money is created out of nothing.
It's a fugazi
https://preview.redd.it/pc7zst4xjdqc1.jpeg?width=1296&format=pjpg&auto=webp&s=f197dbe4e6892496d1b4ee52da2ada959d08846e
It’s a fagoozi a fuzagi
It’s a woozy
Fairy dust
It’s all a big nothing.
Angel dust
Yet OP has less than nothing in his bank account, explain that?
Free labor best labor
Yes, that is what the modern concept of money means
Yes. That’s why I pointed out that OPs line about the bank creating the money is meaningless.
True regarded post, amazing
Crypto Tea is so regarded, I’m not sure they even qualify a spot here. We have standards.
Cryptard
What do you expect from a r/JordanPeterson acolyte?
Gonorrhea?
SHOULD be giving OP 1929 vibes…
Gives me 10k BC vibes when we agreed to accept stones as our currency, yet the third tribe found a lot of those stones around and crashed our local economy. We had to go back to berry picking for a decade.
Every year WSB re-discovers like one of the most basic and econ 101 concepts , fractional reserve banking. Next someone will post that "balance sheets" actually balance ! MIND BLOWN! I wonder what very basic topic you guys will discover next?
pants
I was gonna say pockets, but yeah…gotta have pants first.
Can't have pants if you're selling options naked
"Taxes", am I right guys!?
There’s a *new* Mexico?!
Probably Index Funds right before the next bear market and quit right before the market picks up again
Cryptotea is definitely a great place to learn about finances.
LMAO a great place to get robbed and rugged 
America runs on debt
I use a credit card at Dunkin ok?! So?!?!
Why wouldn’t you? Get those sweet sweet rewards
Dunkin ? No ?
Shhh don't tell anyone money is actually worth about 3% less every single year
More like 10% nowadays
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Not just the furry art anymore?
Inflation is a top secret conspiracy and no one knows about it so please don’t tell anyone
Can someone explain to me why inflation actually happens? Or link to somewhere that is not completely bs
What does that have to do with this?
Holy hell WSB has become the dumbest sub on reddit
You misspelled “always was”
https://fred.stlouisfed.org/series/TOTRESNS Crypto accounts thrive on mediocre understanding of economics & fearmongering
The bulk of those reserves were the massive money printed in 2008 and 2020 lol look at those spikes dayummm
Yep. Banks have been using much of the newly printed money to shore up their reserves, despite lax requirements.
You realize it went back up, right? That's why Bloomberg has all those ads yelling about Basil III endgame.
Lol he didn't even look at the date of that action and wonder jeez why'd they do that then was the economy in a rough spot or something?
Do you have current numbers?
https://www.federalreserve.gov/supervisionreg/large-bank-capital-requirements.htm They're mostly using capital ratios rather than reserve requirements now.
ELI5?
Banks need to hold at least 7% of their capital as equity, and more if they're invested in riskier assets, to serve as a buffer before the depositors or bond holders get hit.
Because my brain has as many ripples as a cue ball and my googling skillz are weak and pathetic, how does this compare to requirements in 2019, and if you’re feeling spicy, 2012 and 2007 as well?
Not much different, but banks must now comply with Basel III regulatory capital ratios which use ‘risk-weighted assets’ as the denominator. The regulators are much more involved in this calculation. Essentially, riskier loans now require more capital to be pledged against them. Operational and market risk require separate capital to be held against them. Concentration limits are in place. Overall, most developed markets have banking sectors that are much more sound than they were prior to the global financial crisis. Currently, I think the US and German banking sectors are absorbing ~20% declines in commercial real estate values and seeing very little systemic issues (NYCB withstanding). This would have been unheard of in 2010.
thanks
Ok, I realize he’s a regard but don’t downvote him for asking for the answer.
You should be downvoted to oblivion if you come in here with inflammatory posts and don't even know what the counter argument *is*, much less how to counter the counter. Nobody made him post this.
He was asking a question in his post lol what is wrong with y’all
*He*'s the OP. Sorry but if you're gonna need to ask follow up questions, maybe you should hold off on creating the post? I'd agree with you if he were some random other user trying to learn.
Thanks for looking out for a highly regarded member.
I was asking a question and not making a statement
You were making a statement with the original post, which this follow up question indicates you didn't fully understand.
In todays society, people will go “I’m just asking questions 🤔🧐 why am I being silenced???” Same kids who didn’t bother to pay attention in school and think the teachers had it out for them.
Does anyone else think OP is a dishonest dork? I'm not saying he is. I'm Just Asking Questions. I love JAQing in public.
Right this sub ruthless lol
This sub is meant to be ruthless
Sarah will have pledged her assets as collateral to the bank, and even if they didn’t take collateral up front courts in bankruptcy side with creditors like banks over others. *edit*: in theory a bank underwriting officer could loan to someone with no collateral in place or a collateral agreement, but that would be a WSB alumni acting as the underwriter
You mean I can’t just click ‘take loan’ like I can with margins on Robinhood? Wow that’s so lame
[удалено]
Is it all cool now?
The hell are you doing with my money in your house Fred?
Sarah already has the 100k, does this guy think she can just walk up and withdraw another for free 😂
It's a shame how much the average financial knowledge of a wsb user has plummeted since gamestop
It gives me George Bailey vibes, hopefully a few angels will at least get their wings.
Cryptard spewing nonsense.
Cant be dangerous, because historically daddy fed prints that 100k. Problem solved, 100k made out of nothing. It’s like when I plant a tomato seed. One seed turns into 50k tomato seeds. Mother Nature at work.
The FDIC exists and the Fed can still loan them money. We don’t have bank runs anymore… just worse inflation
Lol banks have been doing this before 2008. Why do you think they don't charge monthly fees if you hold a certain balance?
Just wait until she learns about tether's "reserves".
No. Most of the money that a bank loans out is secured with a lien against assets The OOP is using loan and withdrawal interchangeably when they are not the same thing.
Stop listening to retarđs on Twitter Listen to Kashkari: There is an infinite amount of cash.
Spoiler alert, they don't even need someone to deposit the 100k for the 100k loan they give out.
go watch the nat geo channel for your ber porn, regard
Many countries don't have reserve requirements anymore because they are redundant if you have strong capital requirements. If banks need liquid cash they can always borrow from the central bank as they routinely do. As long as they have enough capital to support their balance sheet, there's no reason for the central bank to refuse to lend to them short term cash. So capital requirements can effectively replace liquidity requirements. Liquidity requirements are just a relic from a time before capital requirements and electronic transactions. In the example you gave, if Sarah has good credit and the bank has enough capital to cover the risk that she defaults, there's no issue for the bank to let them both withdraw 100k. The extra 100k will be liquidity provided by the central bank, and the commercial bank will just have a loan asset of 100k to Sarah and a liability of 100k to the central bank.
Yeah you live in a society based on trust. As long as John and Sarah trust eachother, banks and society as a whole will function great and nothing bad will happen
That’s how the Great Depression happened. We should all bank run and get the fdic insurance money
A few years ago I wanted 30k cash to buy a truck, I had to go to 6 different banks on a Friday afternoon to get all the cash together. This was US Bank. After that bullshit, I closed all my accounts with them and went to a couple local credit unions
Ever heard of IORB (interest on reserves) or IOER (interest excess reserves)?
That's confusing required reserves, which indeed went to zero, with actual reserves wanted by banks. A lot of countries have had 0% reserve requirements for a while, and no catastrophe occurred.
Naaah All banks are like this. Theoretically speaking, if like 40 or 50% of people pull there money simultaneously out of banks like bank of America it'll collapse the bank. Most of the money Is tied up. And this percentage varies by bank. But no bank has a 1 to 1 hold of liquid assets per savings accounts.
I was gonna say did someone just discover fractional banking?
It’s the same thing that happened during the Great Depression and is more complicated that just this
How do you think money is created, OP?
Comrades struggling to gin shit up after blowing their whole load in 2016. Yeah, this feels exactly like 2008. Almost identical. Nothing is different, really, 2024 = 2008, comrade, you nailed it. Instead of ignoring the Fed, I now understand they are a symptom of our foolish capitalist government! Alexei who, eh?
I feel like a lot of these popular subs are being overrun with either bots or terminally online incels. Check out OPs history, dude worships Jordan Peterson lmao
Probably just kids who don’t know anything about finance. The OP was probably 5 when 2008 happened.
The banks can buy options with the money
It's literally how our economy works. I think they can do that like 18 times
This will not be the reason for a crash. Much more likely will be consumer credit issues
This isn’t true at all.
Or just put that 100k under your mattress…just sayin.
Avoid “It’s a Wonderful Life” at all costs.
Yes. This is as scary as it sounds, and it just happened 1 year ago with the SVB bank fallout. Everyone went to pull money out when tech was taking a beating and they shut the bank down. Imagine your money is in a bank, and they screwed up how they do business so you can't access your money. This why Balaji is talking about bank runs being a major catalyst for the bitcoin and crypto markets. No middle man necessary, and they can't loan out what they don't have access to.
Consolidation of banking. Banks distribute currency. Our currency is abt to change. The roll out will be easier with less distributors aka banks. If CEO of JP Chase sold stock for 1st time in decades, implemented AI to reduce the need of humans, and on top of that is talking about a 3 day work week....that's one of the sector leaders showing you they got leaner and are preparing for something. Also I could be totally wrong. I have alerts set to short regional small banks.
wait. why would she go to take out the money from the bank? if Sarah gets the money, it's because it's already loaned to her, and she has it. so if John goes to the bank and withdraws his money, would they have it at hand?
this is called foreshadowing actually
worse than 2008 but yep nightmare fuel.
Ill leave this gem here https://youtu.be/iFDe5kUUyT0?si=4FEPuuBLK397r_uM
Love cryptotea_
As a wise man once told me, “it’s all just numbers on a piece of paper”
Well yeah, that's how it's been for ages... The loans that people get are money created from thin air. That's why rising interest rates is a tool to curb inflation : people take out less loans... And also pay more interested in real hard-earned money.
It's perfectly fine now. They just print more. It's not like it used to be when it was all backed by gold. It's just paper now, we're good.
YO OP, Sarah took a loan… meaning she *owes* the bank 100k and probably done with a collateral. She misses one payment, bank seizes and sells her collaterized asset, takes their 100k loan plus interest. The bank isn’t going to give her another 100k. You and this Crypto Tea person is so regarded I’m not sure we have a spot for you both.
Money is only credit note it’s always created out of nothing.
Triple leverage is for rookies!!! X(n) leverage that is for pros!!
I mean the MANDATORY minimum is zero but actually keeping zero is just a terrible idea for any bank. Idk what the average % is tho
Yea, tops almost in. People start talking about this every time investments are topping out. Lol
Bank: Sowwy Johnny, your cash no more 
Reserve requirements have never constrained lending. I believe Canada has not had a reserve requirement in a very long time. If the bank reserves ever ran low, they can borrow more from other banks or as last resort from the central bank. The actual limit to lending is the capitalization ratio. These limits are set by the Basel Accords.
I wouldn’t jump to any conclusions. The major banks all still have to abide by the Federal Reserve’s liquidity and stress testing requirements. SVB failure was an additional driver of new initiatives in the liquidity funding space to ensure greater stability. If you’re interested: https://www.federalreserve.gov/newsevents/speech/barr20231201a.htm
Bitcoin fixes this.
At least you will have your money regardless, insured. Go buy a Bitcoin and be at the mercy of some whales who decide the price. I am with Banks and US dollars.
Doesn’t mean much considering banks collect interest on reserve balances via the fed, it’s the policy rate. Banks have plenty of incentive to hold ample reserves, that’s why we’re in a ample reserve economy durrrr
lol, the op is quoting an old requirement during covid. 🤷♂️
Sarah doesn’t have 100k, Sarah is in 100k of debt. The bank owes John 100k, but Sarah owes the bank 100k. They aren’t making cash out of nothing, unless they mean the interest. Although that said, money as a whole is pretty much made up. The government can just magically print more.
Bank run? It sounds like an infinite money glitch
Money isn’t real lol
0% reserve is no accident; get ready for 2008 x100 T-30
This is the dumbest shit I’ve ever read. I’m almost certainly stupider for having read this.
Mfs don’t even know about Basel III
FYI - That was the first week of Covid.
And they mad at $BTC on the /rbuttcoin sub saying it’s a ponzi??!
I feel like it could be smart to “invest” in cash
Josh and Sarah will be covered by Shanayvia or Archibald’s accounts. And so on so forth. So we are good don’t you worry too much and don’t ask too many questions ….
This scenario presumes that people liquidate their savings account routinely, or that banks aren’t receiving massive amounts of revenue from interest.
https://preview.redd.it/0iztn3txkdqc1.png?width=1080&format=pjpg&auto=webp&s=e5a00df3a15eadf8b50bf04632ac5f9a58a7d84e We can print more and give it to the banks
This is inaccurate. Capital requirements require a bank to have adequate capital, cash on hand, and excess to that requirement, at the Fed. All banks must have a 4.5% capital base + a 2.5% "stress capital" requirement, with the "too big to fail" banks required to hold an additional 1%. This action eliminated the requirement to hold the reserves at the Fed, which paid no interest, thus was a de facto tax on the bank. [https://www.federalreserve.gov/supervisionreg/large-bank-capital-requirements.htm](https://www.federalreserve.gov/supervisionreg/large-bank-capital-requirements.htm)
Yes, go take your money out of the bank asap
Banks have to reserve capital based on the risk weighting of the asset its lending.
It’s also not like borrowing from one person John in this example. There are probably millions of customers.
Not really, because this is why the FDIC was created, both John and Sarah will get their money eventually. The problem is that, when the media makes a news story out of it they portray as “the bank has no money” and people freak out and all pull their money from multiple banks at the same time, which runs the risk of depleting the FDIC fund (which theoretically shouldn’t be possible, but absolutely is) and is certainly disastrous for the individual banks, as aside from vandalism and rioting, depending on how they’ve invested deposits it could very well lead to the bank going out of business and, if it is publically traded, its stock plummetting to zero, which can lead to federal takeovers. We’ve seen many examples of all of this over the past couple decades (and this is, of course, as simplified as the offered example was). This is also where the “too big to fail” excuse to bail out the banks came from; sloppy management led to poor investing/high risk loans with some of the biggest institutions because they knew the government would never let them collapse due to the effect it would have on the overall economy. The bigger threat in a full on societal bank run like we almost saw in…2007? 2008? Can’t remember. Anyway, the bigger risk is devaluing the currency itself as bank crashes lead to market crashes. Something similar happened in Germany in 1923, where there currency became so devalued it was cheaper to wallpaper your house with it than to buy wallpaper. I remember a friend asking me if he should pull all his money out of the bank back in 08 and I told him not to bother; records are all digitized now so your balances up to $250,000 per customer per institution are “secure” as such, and any eventuality that would lead someone to pull their cash would also contribute to that cash being worthless, so it actually makes more sense to leave it. Unless you were immediately converting it to another commodity, but in most cases in the modern era you can use your debit card to do that. Should we allow banks to hold 0% reserves? There are pluses and minuses to the system. But it’s where we are, and it’s nothing to freak out about (because by the time it’s worth freaking out it’s too late anyway). IMO? A bank should have enough liquid capital to meet the FDIC coverage amounts per customer minimum, but I also don’t think it needs to be on site, just as long as it’s not invested (see the silicon valley bank failure for more on that). Disclaimer: I am not an economist or a banker, this is all “to the best of my knowledge”, so I may not be 100% accurate but that is my basic understanding of it.
US has 0% reserve requirement? That’s actually insane
Well , too late to put on banks , rates are cutting .
what if none of this mattered because it's all just numbers in computers anyway? Shock, right? It's almost as if bank runs were the result of arbitrary rules and the people withdrawing. Now are the rules well intentioned... yes. Do bad things happen if the rules are not followed - yes and no - mixed bag. Can bank esplode still - yes - all depends on who intervenes.