Sunday, March 31, 2013

How Cyprus Exposed The Fundamental Flaw Of Fractional Reserve Banking

http://www.zerohedge.com/news/2013-03-31/visualization-modern-fractional-reserve-banking-and-how-cyprus-fits


Total US Currency in circulation (i.e., all US Dollars out there): $1,102 billion (source)
Total Deposits in US Commercial Banks: $9,294 billion (source)
Which means that if (and we are not saying it will) a Cyprus-style fiasco were to occur in the US, and those $9.3 trillion in total deposits seek to obtain
"physical representation" in the form of actual currency (i.e., a systemic bank run), just as all those lining up in front of Cypriot ATMs are desperate to do each and every day when they have a €300 limit on physical cash withdrawals, there will be a roughly 88% haircut for every single dollar that US savers believe is "safe" in the bank.

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