The U.S. has a fractional reserve banking system: for every dollar banks lend out, 85 cents comes from deposits and 15 cents from their own equity. The problem with deposits, as we saw with the demise of Silicon Valley Bank, is that depositors are fickle – they can ask for their money back at any time.
Banks lend your money to others. There is an inherent imbalance of liquidity in the banking system that we never notice, which is absolutely fine as long as banks have proper reserves, do not experience losses on their loans…
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