Banking is inherently unstable. Bankers are making it up as they go.
There are numerous examples throughout history that prove this:
- 🇨🇾 Cyprus Banking Crisis (2013) - Cypriot banks got in deep trouble due to Greek debt exposure, leading to bank runs and capital controls. Uninsured deposits were controversially used to rescue the banks through a "bail-in."
- 🇺🇸 IndyMac Bank (2008) - During the 2008 financial crisis, IndyMac, a California-based bank, saw depositors withdraw over $1.3 billion in just 11 days, leading to its collapse and takeover by the FDIC.
- 🇬🇧 Northern Rock (2007) - The first UK bank run in 150 years happened when the subprime mortgage crisis hit, with depositors withdrawing £1 billion in only three days.
- 🇦🇷 Argentine Financial Crisis (2001) - A huge bank run during the economic meltdown led the government to freeze bank accounts and convert dollar-denominated accounts to pesos, causing many to lose their savings.
- 🇬🇧 Barings Bank (1995) - London's oldest merchant bank went under after rogue trader Nick Leeson caused over £827 million in losses, leading to a run on deposits and the bank's eventual bankruptcy.
- 🇺🇸 Continental Illinois (1984) - Risky lending practices led to a bank run and the collapse of the seventh-largest US bank at the time, requiring a massive bailout from the Federal Reserve.
- 🇮🇹 Banco Ambrosiano (1982): Nicknamed "God's Bank" due to Vatican ties, Banco Ambrosiano collapsed because of fraud and a run on deposits, leaving a $1.4 billion hole in its balance sheet.
- 🇩🇪 Herstatt Bank (1974) - A bank run on this Cologne-based bank, triggered by massive forex trading losses, led to its collapse. An event widely referred to as the Herstatt crisis, this highlighted the importance of settlement risk in foreign-exchange markets and was a key factor that led to the worldwide implementation of real-time gross settlement (RTGS) systems
- 🇺🇸 Bank of United States (1931) - During the Great Depression, a run on the Bank of United States caused it to fail, making over $200 million in deposits inaccessible for its 400,000+ depositors and worsening the economic crisis.
- 🇺🇸 Great Depression Bank Runs (1930-1933) - After the 1929 stock market crash, a series of bank runs swept the nation, causing over 11,000 banks to fail and wiping out about $140 billion in savings (in today's terms).
And this is a partial list!!!!
here is the full list: https://www.lava.xyz/blogs/is-centralized-finance-safe
and it continues into infinity in the future :)
https://nostr.build/i/nostr.build_ec9f9c294da03e0741f80a75418ccb1bf9f6b7682f72531a870b89c6f8723c85.jpg
A large part of why my dad saw value in Bitcoin all the way back in 2013 even though he is not a techie guy at all is specifically because he is Cypriot and knows all about what a corrupt government can do when citizens have no financial sovereignty... in the Cyprus banking crisis they literally stole money straight out of people's bank accounts.
Plenty of people outside of the comfortable West need no explanation as to why these concepts are so vital. This is a large part of why we are seeing less wealthy nations like El Salvador adopt Bitcoin as legal tender.
That and of course the geopolitical reasons (no more dependence on the USD means the US gov has less leverage over the country and so on).
The way I see it, the bigger problem is that big banks are immune to the free market, as they will just get bailed out by central banks any time they fail. It is a feature, and not in any "banks are inherently terrible" way. It's a feature in the sense that banks will gradually become more stable and niche, working only with the things they ought to and reasonably can, instead of flying by the seat of their pants and waiting for the Fed and FDIC to save them.
TLDR, not an inherent bank issue but a moral hazard in our modern system issue.
Bitcoin is an idea. So is fiat. But fiat is a very badly design idea. Indeed fiat is a new form of slavery. Bitcoin is indeed freedom!
And if banks don't fail, they get bailed out until the currency itself fails, history is lost on many
When will people learn
Debt is the cause of all this, and it got exponentially worse after 1971:
https://pbs.twimg.com/media/FrrZAiUacAINWXT?format=jpg&name=medium
The ability to be your own bank, store and port your wealth securely all over the world without counterparty risk is such a ridiculously groundbreaking innovation and 99.9% of people have no clue.
What people dont understand is that this is intended. Chair Powell just cant say it in plain words. Last year he said there will be pain. This is the beginning of that pain. The thing is, they always think they have control. They never do!
Many crypto projects fail too. But mostly because they were scams or rug pull projects. We humans are full of features 😁 At least we have Bitcoin ;)