Can bitcoin fill the void in a bank run?

[Martin P. Hellwig]

Am I missing the point or do I not understand your question?
What do you actually mean by filling the void? As I interpret it as: All fiat currencies have gone to smithereens and people lost all value in it and need to start again from scratch, perhaps by using bitcoin? Yes of course in that scenario bitcoin can fill the void, as can seashells, garden peas and whatever else you can convince other people to accept for trading.

In any other scenario, it would be the same question as; Can pesos fill the void in a bank run?

[1713994709]

1713994709

[1713994709]

1713994709

[CurbsideProphet]

Because of the FDIC the next bank run will be different. It won't be a mad dash to get dollars, we can get those for sure. It'll be a dash to get value for our dollars. There is and can be no guarantee on that. I suspect people who have no more room for cans of beans and toilet paper will try to get some of their wealth through the crisis in gold and bitcoin.

The FDIC has almost no money. The banks that fail every Friday like clockwork have depleted the insurance fund completely. Sheila Bair is operating off of a 500 billion line of credit with Treasury, which will not be nearly enough to prevent a bank run should a TBTF go down.  Increasing that line of credit literally requires an act of congress, meaning it wouldn't happen in time to do any good. Besides, Treasury is Broke too.


Bank runs are always, always deflationary, but the big financial crisis may not be a bank run. It depends on how much liquidity the FED provides. Too much and the ship alters course from Japan to Zimbabwe.

Failing banks have had their deposits purchased by other financial institutions.  They're not depleting the FDIC fund.  The only issue with the FDIC is it's reserves are only a fraction of their outstanding obligations so a widespread bank run would deplete the fund.  But the banks currently failing right now are not doing anything to those reserves.

[FreeMoney]

Because of the FDIC the next bank run will be different. It won't be a mad dash to get dollars, we can get those for sure. It'll be a dash to get value for our dollars. There is and can be no guarantee on that. I suspect people who have no more room for cans of beans and toilet paper will try to get some of their wealth through the crisis in gold and bitcoin.

The FDIC has almost no money. The banks that fail every Friday like clockwork have depleted the insurance fund completely. Sheila Bair is operating off of a 500 billion line of credit with Treasury, which will not be nearly enough to prevent a bank run should a TBTF go down.  Increasing that line of credit literally requires an act of congress, meaning it wouldn't happen in time to do any good. Besides, Treasury is Broke too.


Bank runs are always, always deflationary, but the big financial crisis may not be a bank run. It depends on how much liquidity the FED provides. Too much and the ship alters course from Japan to Zimbabwe.

Congress doesn't do fast trillion dollar bailouts? Since when?

Deflationary bank runs are for real money. You can say that what is coming won't be technically a bank run, I guess I would agree, but it sure as hell won't be deflationary.

[billyjoeallen]

Because of the FDIC the next bank run will be different. It won't be a mad dash to get dollars, we can get those for sure. It'll be a dash to get value for our dollars. There is and can be no guarantee on that. I suspect people who have no more room for cans of beans and toilet paper will try to get some of their wealth through the crisis in gold and bitcoin.

The FDIC has almost no money. The banks that fail every Friday like clockwork have depleted the insurance fund completely. Sheila Bair is operating off of a 500 billion line of credit with Treasury, which will not be nearly enough to prevent a bank run should a TBTF go down.  Increasing that line of credit literally requires an act of congress, meaning it wouldn't happen in time to do any good. Besides, Treasury is Broke too.


Bank runs are always, always deflationary, but the big financial crisis may not be a bank run. It depends on how much liquidity the FED provides. Too much and the ship alters course from Japan to Zimbabwe.

Failing banks have had their deposits purchased by other financial institutions.  They're not depleting the FDIC fund.  The only issue with the FDIC is it's reserves are only a fraction of their outstanding obligations so a widespread bank run would deplete the fund.  But the banks currently failing right now are not doing anything to those reserves.

The banks have more liabilities than assets, which is why they get taken closed down by the FDIC in the first place. Yes, other banks buy the deposits, AFTER the FDIC adds enough cash to make the purchase worthwhile.  You really should read the press releases that detail how much the bank failure costs the fund.

More info at calculatedrisk.com

[cypherdoc]

More info at calculatedrisk.com

one of my favorite websites altho CR has been way more bullish than i have been.

[cypherdoc]

You're taking your advice from an article writen by "Tyler Durden"?

Zerohedge is the best econoblog on the Web, IMHO- certainly the most subversive. The blog owner uses a psudonym to promote free speech, the same way the authors of The Federalist Papers did.

Zerohedge is the Wikileaks of Wall Street.

+1

[cypherdoc]

Because of the FDIC the next bank run will be different. It won't be a mad dash to get dollars, we can get those for sure. It'll be a dash to get value for our dollars. There is and can be no guarantee on that. I suspect people who have no more room for cans of beans and toilet paper will try to get some of their wealth through the crisis in gold and bitcoin.

The FDIC has almost no money. The banks that fail every Friday like clockwork have depleted the insurance fund completely. Sheila Bair is operating off of a 500 billion line of credit with Treasury, which will not be nearly enough to prevent a bank run should a TBTF go down.  Increasing that line of credit literally requires an act of congress, meaning it wouldn't happen in time to do any good. Besides, Treasury is Broke too.


Bank runs are always, always deflationary, but the big financial crisis may not be a bank run. It depends on how much liquidity the FED provides. Too much and the ship alters course from Japan to Zimbabwe.

Failing banks have had their deposits purchased by other financial institutions.  They're not depleting the FDIC fund.  The only issue with the FDIC is it's reserves are only a fraction of their outstanding obligations so a widespread bank run would deplete the fund.  But the banks currently failing right now are not doing anything to those reserves.

The banks have more liabilities than assets, which is why they get taken closed down by the FDIC in the first place. Yes, other banks buy the deposits, AFTER the FDIC adds enough cash to make the purchase worthwhile.  You really should read the press releases that detail how much the bank failure costs the fund.

More info at calculatedrisk.com

you're absolutely right but they also guarantee many of the bad loans that get passed on to the new bank owners.

[foggyb]

AHHHHH, don't lie to these people that FRN is not backed by anything. it is backed by none other than guns.

Guns don't kill people.

[CurbsideProphet]

The banks have more liabilities than assets, which is why they get taken closed down by the FDIC in the first place. Yes, other banks buy the deposits, AFTER the FDIC adds enough cash to make the purchase worthwhile.  You really should read the press releases that detail how much the bank failure costs the fund.

More info at calculatedrisk.com

Maybe it's my work browser but your link takes me to some foreclosure website which doesn't look like what you intended to show.

Washington Mutual was the largest bank failure in history but the cost to the agency was zero.  Yes, some of the bank failures cost the Deposit Insurance Fund but in turn all other banks pay higher premiums.  If failures exceed what's available in the DIF, the FDIC has a line of credit with the Treasury it can tap into.  I believe the only time the FDIC tapped into the line was in the early 1990s.

The bank failures we are seeing right now are small, local banks for the most part.  Nothing like what we were seeing ~2008.  Don't get me wrong, I'm not saying the FDIC has the means to cover a systemic bank failure, they don't.  But the current bank failures are not really putting the FDIC in jeopardy.  If that were the case, we'd already see a run on banks.

[cypherdoc]

The banks have more liabilities than assets, which is why they get taken closed down by the FDIC in the first place. Yes, other banks buy the deposits, AFTER the FDIC adds enough cash to make the purchase worthwhile.  You really should read the press releases that detail how much the bank failure costs the fund.

More info at calculatedrisk.com

Maybe it's my work browser but your link takes me to some foreclosure website which doesn't look like what you intended to show.

Washington Mutual was the largest bank failure in history but the cost to the agency was zero.  Yes, some of the bank failures cost the Deposit Insurance Fund but in turn all other banks pay higher premiums.  If failures exceed what's available in the DIF, the FDIC has a line of credit with the Treasury it can tap into.  I believe the only time the FDIC tapped into the line was in the early 1990s.

The bank failures we are seeing right now are small, local banks for the most part.  Nothing like what we were seeing ~2008.  Don't get me wrong, I'm not saying the FDIC has the means to cover a systemic bank failure, they don't.  But the current bank failures are not really putting the FDIC in jeopardy.  If that were the case, we'd already see a run on banks.

http://www.calculatedriskblog.com/

the FDIC has been able to extend and pretend much longer than any of us would have thought.  they really don't have the reserves to have guaranteed everyone's acct up to $250K and some accts have unlimited guarantees.  thats plain ridiculous and they certainly would have to tap Treasury to cover losses in a bank run.  what can't go on forever won't.