Remember the scene from Dumb and Dumber when the bad guy opens the money briefcase to find a bunch of pieces of paper instead of money?

 

Bad Guy: “Where’s all the money?”

 

Lloyd: “That’s as good as money, sir. Those are IOU’s. You can add them up yourself. Every penny’s accounted for.”

 

As ludicrous as the situation is, it isn’t that far from the truth…

 

 

-Content Level: Advanced-

In this episode, I continue the talk from last week with Murray about the banking system, discussing how it works and pontificating on the systemic risk that is inherent in the current structure of banking.

 

We discuss:

-fractional reserve banking

-bank runs

-FDIC insurance

-how risky is too risky in the banking system

-economic cycles theory