Thinking about bank runs. Prior to federal deposit insurance, why couldn't banks protect themselves from runs with explicit policies? Like, “if our deposits drop by more than X% in Y timeframe, we will automatically halt withdrawals.” Did any banks ever try this?
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How is “information-insensitive” not just another way of saying “very low-risk”?
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Described at length and more coherently in the book, but there is a very difference from saying “I model patio11 as extremely low risk; T-bill plus 10 bps risk of default maybe” and “I can entirely ignore patio11’s situations.” When debt becomes suddenly info-sensitive CRISIS.
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Lacking sleep at the moment but with API brain engaged the way I’d explain it is “Most money isn’t money, it is debts, and those debts have extremely material implementation details, but the service of banking wraps them in the money abstraction and protects you from details.”
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This is a practical and product-driven definition,and the actual differences between money and debt are very confusing, nuanced and theoretical. Of course they become easier to understand when they are defaulted or inflated.
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