Michael Burry’s remarks point to a recurring feature of modern banking systems. When reserves decline and liquidity must be restored through central bank asset purchases, it indicates that stability depends on continuous intervention rather than balance sheet strength. Banks that require trillions in excess reserves are not demonstrating resilience. They are demonstrating sensitivity to funding conditions.
The Federal Reserve’s decision to purchase short-term Treasury securities to replenish reserves follows a familiar pattern. Liquidity is withdrawn during tightening phases, stress appears in funding markets, and balance sheet expansion resumes to prevent dislocation. Each cycle leaves the system larger and more dependent on central bank support than before. This is not temporary. It becomes structural.
The growth of the Fed’s balance sheet from under one trillion dollars before 2008 to nearly seven trillion today reflects this trajectory. After each crisis, the level of reserves required to maintain stability increases. What is described as “ample” today would have been considered excessive in earlier periods. The definition shifts because the system adapts to higher leverage and lower tolerance for volatility.
Bitcoin was designed in response to this fragility. It does not rely on reserves, lenders of last resort, or discretionary liquidity injections. Settlement does not depend on confidence in counterparties remaining solvent overnight. The supply cannot be expanded to backstop losses or smooth funding gaps. Participants either hold valid coins or they do not.
In fiat banking systems, stability is achieved through balance sheet growth and policy intervention. In Bitcoin, stability is achieved through fixed rules and independent verification. One system requires constant maintenance to avoid failure. The other operates continuously without adjustment.
Warnings about fragility are not predictions of imminent collapse. They are observations about incentives. When survival depends on permanent expansion of central bank balance sheets, the monetary base becomes a tool for crisis management rather than a stable foundation. Bitcoin exists to remove that dependency.
https://www.perplexity.ai/page/big-short-investor-michael-bur-eTlWTnBXTka_nFRazhHM4A