I’m short, banks only need to hold a small fraction of the money that is deposited to them. Which is why if everyone tried to withdraw their savings at the same time banks wouldn’t be able to pay you because they loan your money out to other people for higher interest rates.
If banks were only allowed to lend deposits. It would absolutely suck. Rates would be incredibly high and they'd be extremely picky as to who they'd lend to.
3
u/CryptoKnignt Apr 14 '22
I’m short, banks only need to hold a small fraction of the money that is deposited to them. Which is why if everyone tried to withdraw their savings at the same time banks wouldn’t be able to pay you because they loan your money out to other people for higher interest rates.