Before government involvement, banks stemmed bank runs by forming a consortium to pool resources and by limiting depositors' ability to withdraw on demand (e.g., notice requirements and instruments like certificates of deposit), giving banks freedom to invest more productively in exchange for paying interest.

factualpending

Speaker

Russ Roberts

Evidence Quote

they'd also limit your ability to have your money on demand so I... am willing to forego having my access to my cash on demand in return for the fact that they'll be able to invest it more effectively

Source

Arnold Kling on the Unseen World of Banking, Mortgages, and Government 07/5/2010EconTalk
Created: 6/13/2026, 7:04:06 PM

My Notes

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