What Happens If Your Bank Runs OUT OF MONEY? | Summary and Q&A

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May 17, 2019
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Minority Mindset
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What Happens If Your Bank Runs OUT OF MONEY?

TL;DR

Banks lend out deposited money to borrowers, and if those borrowers default, the bank might run out of money.

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Key Insights

  • 💵 Banks invest deposited money by lending it to borrowers and earn interest from these loans.
  • 💵 Borrowers' defaults can lead to banks running out of money, especially during economic downturns.
  • 💵 Fractional reserve lending allows banks to lend out more money than they actually have on deposit.
  • 🏦 The FDIC provides insurance for deposits up to $250,000, protecting individuals in case of bank failures.
  • 🎓 Financial education and investing are crucial to ensure a better understanding of the banking system and protect personal finances.
  • 🍝 Bank failures have occurred frequently in the past, with an average of about two and a half failures per month between 2000 and 2019.
  • 💵 The FDIC is funded by taxpayers and tax dollars, allowing them to reimburse depositors in case of bank closures.

Transcript

what's up everybody I am dust but it's saying I welcome to the minority mindset you know what's really weird yeah uh this cardigan yeah besides that so I just went to the bank to deposit a check and when I went to the teller and handed her the check she told me that I will be able to access my money whenever I want after 48 hours have you heard som... Read More

Questions & Answers

Q: What happens when you deposit money in a bank?

When you deposit money in a bank, it is invested by lending it out to borrowers, allowing the bank to earn interest.

Q: What happens if borrowers default on their loans?

If borrowers can't repay their loans, the bank might not receive the money back, potentially causing the bank to run out of money.

Q: How does fractional reserve lending work?

Fractional reserve lending allows banks to create more money by leveraging a fraction of the deposited money and lending out more than the actual deposit amount.

Q: What happens if a bank runs out of money?

If a bank runs out of money, it might be unable to fulfill withdrawal requests, leading to panic and potential bank closures.

Summary & Key Takeaways

  • When you deposit money in a bank, it doesn't just sit there - the bank invests it by lending it out to borrowers.

  • The bank earns interest from these loans, while depositors receive a small interest on their deposits.

  • If borrowers default and the bank cannot recover the money, it can lead to a bank running out of money.

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