He means that full reserve is superior to fractional reserve (obviously)

If too many people realize this at once, you can get a bank run because bank credit is based on the bank's loan book, which is largely a mortage book and will not be made whole for many years

This could lead to liquidity crises and, in turn, insolvency crises, needing more bailouts, bail ins, bank runs and printed money -- we see it in some countries already

We've never had a full reserve asset before, and everything else must adjust to that.

Reply to this note

Please Login to reply.

Discussion

Yes , that sounds more correct. Thanks for giving me another viewpoint.

Interestingly enough, CBDCs will also be full reserve, since they will likely be backed by the CB, rather than a loan book

That's why they are having to ration them, each person will get maximum of 1000 units or so

CBDCs also pose systemic risk to the system

Not to mention other defects such as privacy issues. Possible future scenario:

Bitcoin > CBDCs > Bank Credit

zapped for good answsers :-)