When Banks Run Out: What Really Happens in a “Bank Run” (Hint: It’s Not Like the Movies)

 

90%
of money is created by banks out of thin air

 

 

90%
of which is used for speculation

 

 

90%
of the population does not know these facts...

 

What’s a Bank Run? And Why Should We Care?

Imagine this: It’s payday. You head to the bank to pull out some cash, but the line’s out the door. Panic sets in as the whispers get louder: “They’re out of money!” Suddenly, the bank feels less like your trusty financial fortress and more like a house of cards. This, my friends, is a “bank run”—and yes, it’s as bad as it sounds.

So, Where’s All the Money?

You’d think that banks have your money stashed in a vault, waiting for you to take it out whenever you need, right? Wrong! The truth is, banks only keep a tiny fraction of what we deposit. Most of your money isn’t even there—it’s been loaned out, invested, or, let’s face it, spent.

Here’s how it actually works:

  • Money Out of Thin Air: When banks give loans, they’re not handing out real money from a vault. They’re “creating” it on a screen. This new money exists only in digital, virtual form. (Don’t worry, it’s legit… sort of.)
  • The Fractional Reserve Trick: Banks only keep a small fraction of deposits in reserve. They’re betting that not everyone will want their money back at the same time. It works most of the time… until it doesn’t.

 

What Happens During a Bank Run?

Here’s where things get spicy. In a bank run, people panic and try to withdraw their money all at once. Youre real money is mixed up with other virtual money. But because the bank doesn’t actually have most of the money (real and virtual), they’re in trouble. People freak out, more people rush to withdraw, and the bank runs out of cash—quickly.

It’s kind of like a crowded elevator: as long as everyone stays calm, things go smoothly. But as soon as someone shouts “fire!”—well, you get the idea.

Why Are Bank Runs So Dangerous?

Bank runs are bad news because they reveal the dirty little secret of modern banking: banks rely on trust (and a bit of luck). Here’s what happens when that trust wobbles:

  • Confidence Collapse: When a bank run starts, people stop believing their money is safe. Confidence goes out the window, and it turns into a “who can get their money out first” free-for-all.
  • Domino Effect: When one bank collapses, the panic can spread like wildfire to other banks. People start wondering if their money is safe elsewhere, triggering more bank runs. It’s a mess.
  • Government Bailouts: If things get really ugly, the government steps in to save the day. But guess what? That rescue usually means more public debt and taxpayer dollars down the drain.

How Sovereign Money Stops the Panic Before It Starts

What if we didn’t have to worry about bank runs at all? Enter Sovereign Money—a system where the central bank, not commercial banks, creates all money. This money isn’t created out of debt, and it doesn’t disappear when banks get wobbly. Here’s why Sovereign Money is the superhero we didn’t know we needed:

  • Money You Can Actually Trust: With Sovereign Money, your cash is held directly by the central bank—safe, sound, and not being used for risky loans.
  • No More “Run for the Money”: Bank runs become a thing of the past because the money supply isn’t tied up in a fragile debt-based system.
  • A Simpler, Safer System: Instead of banks juggling debts and reserves, we have a straightforward system where the money is truly there when you need it.

In our view, this is the ultimate driver of the problem.

The question is, what will collapse first, society, the earth or the financial system?
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FAQs

  • Wait, so my bank doesn’t keep all my money? Nope! Banks keep just a fraction of what you deposit without my knowledge and permission. The rest? Loaned out, invested, and basically just… gone (in a safe way, they swear).

  • Could a bank run actually happen today? Yep! And they have. Yes, the government offers deposit insurance, but it can cover not more than 1% of all requests and it is in fact only an instrument for eyewashing. A large-scale bank run can still cause big problems for the entire financial system.

Image: jerichow