Your bank balance isn’t in the bank, and other alchemy
About this episode
Patrick McKenzie discusses the misconceptions about bank deposits and their underlying risks, updating his classic essay with recent financial events.
Patrick McKenzie (patio11) reads his classic Bits About Money essay on why your bank deposit is not what you think it is. He explains the capital stack that makes deposits appear riskless while funding genuinely risky businesses, and why the "no questions asked" property of money took the United States roughly a hundred years to engineer. Patrick updates the essay with commentary on SVB's collapse, the Voyager collapse and emergency injunctions about the finer points of ACH plumbing, and the GENIUS Act's stablecoin interest ban. He argues that crypto keeps rediscovering the same hard truth: things that behave like deposits without being deposits eventually break. When they break, they will break other structures they have wormed into, and they will tend to have wormed into a lot, because deposits are extremely useful and are perceived to never break. – Full transcript available here: www.complexsystemspodcast.com/your-bank-balance-isnt-in-the-bank/ – Presenting Sponsors: Mercury , Meter , & Granola Complex Systems is presented by Mercury—radically better banking for founders. Mercury offers the best wire experience anywhere: fast, reliable, and free for domestic U.S. wires…
Sponsors
Mercury, Meter, Granola
More episodes of Complex Systems with Patrick McKenzie (patio11)
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- Cash received is not revenue earned
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- Delve into compliance theatre
- Understanding consumer debt collections: the underbelly of finance
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