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5:00Bank Runs at Internet Speed
SVB lost $42 billion of deposits in one day, no queues, just group chats and a banking app.
A bank run is brutally simple: banks lend out or invest most of the deposits they take in, so they only hold a fraction of your money as cash at any moment. This is fractional-reserve banking. It works as long as depositors don't all ask for their money at once. The moment they do, the bank can't pay, not because it's necessarily insolvent, but because it's *illiquid*.
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