Bank Runs Explained in One Minute: How Banks Become Insolvent and Fail

Bank runs are truly fascinating, not just from an economic perspective but from a psychological one as well. A bank run can even turn a seemingly healthy institution into an insolvent bank.

Due the the fractional reserve banking system I've covered in another video, pretty much all banks would become insolvent during a bank run if let's say 1 out of 3 depositors demands physical currency.

Let's take a close look at bank runs and see how banks can become insolvent and fail if a "perfect storm" bank run situation arises.

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[anye]

As I'm writing this SVB just failed and I had to search what the heck a bank run is and this video pops up. Plain, easy, simple thank you!

[azchspop]

I’m here because of Silicon Valley Bank (SVB) it defunct on March 10, 2023

[OneMinuteEconomics]

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[venorm]

These videos are so gold! Thank you so much!

[bobingalls]

Things have changed since 2020. They wrote new banking regulations stating that you don't own your money once you deposit it into the bank. Once you deposit it, you turned that asset over to the bank. If, for example, banks were hit hard by the next banking crisis, they can use your money for bail-ins and not be legally obligated to pay you back. Not a lot of people are aware of this. Just remember that next time there are bank runs. Even those who get there early the next morning to stand in line may return home empty handed.

[foreigncarsrule]

Wow this video should be shown to anyone who is seriously considering robbing a bank so that it can serve as a deterrent!

[abdullahkhan-qklk]

Very Great Video! Awesome!
You just explained a TEXTBOOK in ONE MINUTE! PLZ DO KEEP IT UP!

[WAKACJEPODGRUSZA]

2023 March 11. Silicon Valley Bank colapsed in 48h... without any "bank run". This bank, as probably many other banks, invest money in US bonds... now loose tons of money.

[dned]

I'm here for the 2020 economic collapse lol

[helenarichard]

Every time I earn money, I go and get it and buy gold. It's not much, but it's honest work. It's MY money. MINE. Banks should not use it to turn it into debt paper. Banks only have 6% of the money they have in their accounts. If we would all get our money off the bank, we create a little bank run and remind them who is in charge 💕

[MrRight-fugf]

The Philippines has FDIC. It was part of the US at one point. Yes it guarantees up to 500, 000 pesos. Which is 100, 000 dollars.

[uchihasurvival]

The issue with bankruns is that you never know when one is actually happening in the moment. You just have to accept the bankrun rumor as fact, because no government would ever admit it officially. When it becomes known mainstream, it's too late and your money is "gone", or should I say indefinitely frozen.

Because of its rumor nature, we may never know if a bankrun almost occured or sizzled out in a given country.

That was the case in Canada back in 2022, where a bankrun almost occurred after bank accounts were frozen. Besides solvency, bad government policy could also trigger bankruns. There's no credible source to back this claim, but I noticed that the CDIC ran more ad campaigns in April reassuring Canadians that their money is safe in their bank account.

[taburzblism]

interesting video, adding this to my "money life" playlist. But i have a question, what happens to all the money that the people hand in to the bank? where does all that money go? obviously its taken out of circulation, but what does the bank actually do with it? always assumed they just burn it lol but it seems kind of silly to say so.

[kennethbigboi]

So does that mean in some way its the opposite of inflation? Since physical money is a good unto itself if there is lack of it (the inability to print that many) to meet the demands of spending and if you technically do have it (just not physical) it will essentially tell you that you do have capital its just that you can't use it. Not to mention, businesses cant pay their employees. It has some similarities with deflation but quite different from it as well in that deflation is due to low demand in money spending and businesses earn less therefore laying off workers and when it comes to bank runs money spending is high but businesses lay off workers due to their wages being frozen.

[georgescotsdale]

So would it be possible to say cause a bank run of purpose. Through organized action or otherwise?

[sleepyturtl]

It's interesting this is what happened and It's a Wonderful Life

[rkan]

So how does a bank run happen with the digital currency?

[Dragon-Slayr]

Shall I start running banks now as other teams need something to fall back on so they can hide behind them? When shall I start as I only have a pixel but you guys see the full picture. Thanks guys love you all.

regards

Stupid game

[bobingalls]

as of 2020, Banks no longer have to legally adhere to the 10% reserve requirement. In fact, they can zero reserves if they choose to do so.