Economics 101

7. Banking and the Business Cycle

03.01.2004 - By Play

Download our free app to listen on your phone

Download on the App StoreGet it on Google Play

One of the most difficult things to understand about banking is how money is created out of thin air.  Current commercial bank liabilities are immediate. The banks do not have the reserves to redeem all demand notes. Thus, banks are inherently insolvent. But, government has eliminated runs on banks. Banks are not allowed to fail when they are mismanaged.

More episodes from Economics 101