“If the bank always has a large enough equity cushion to meet the calling of its short duration liabilities, then it is fulfilling its promises. If it can’t meet these calls, then it is not.”
Random Heresies on Bitcoin and Fractional Reserve
Or, equity, leverage, liquidity, and duration as a guide to understanding money
https://allenfarrington.medium.com/random-heresies-on-bitcoin-and-fractional-reserve-d16b9a683851
“If the bank always has a large enough equity cushion to meet the calling of its short duration liabilities, then it is fulfilling its promises. If it can’t meet these calls, then it is not.”
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