<p>Bank runs are self-amplifying. What would realistically happen if the entire earth would experience a simultaneous bank run?</p>

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2022-02-28T05:26:14.700Z
What would realistically happen if [unrealistic assumption] type of questions are generally hard to answer. There is no precedent to go on.
Giskard
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2022-02-28T05:27:33.987Z
Also, why is there a global run on the banks at all? Do Chinese people want to withdraw dollars to defend against the collapse of the renminbi's purchasing power while American  people want to withdraw renminbis to defend against the collapse of the dollar's purchasing power?
Giskard
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2022-02-28T06:55:07.580Z
@Giskard it's in the realm of the possible. Bank runs are a prime example of self-fulfilling prophecies. You don't even have to believe it to happen - it's enough to believe that there might be enough others who believe it in order to have an incentive to contribute to the bank run. There is no precedent to go by, but economics experts likely can extrapolate the likely consequences?
matthias_buehlmann
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2022-02-28T06:55:58.593Z
Bank runs are absolutely possible! Global bank runs not so much, at least if you mean global literally. See [my second comment](https://economics.stackexchange.com/questions/50580/what-would-happen-in-global-bank-run?noredirect=1#comment81588_50580) for clarification. If you do not mean global literally, please edit to clarify.
Giskard
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2022-02-28T07:04:08.887Z
@Giskard it's a thought experiment really. Let's say you have the full attention of the World and you predict a global bank run. The prediction alone may be enough to cause it to happen if people have reason to believe that enough others might just want to 'stay on the safe side in case it really happens'. It looks like an inherent instability risk in the global fractional-reseve Banking System and I wonder what the consequences would be of it getting triggered.
matthias_buehlmann
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2022-02-28T07:07:49.683Z
As I wrote in the first comment, the thought experiment you propose is not plausible. Also, can you clarify what exactly do you mean by "*what would realistically happen*"? This is very open ended, e.g., the sun would still shine and people would still buy coffee, but you probably have another specific aspect in mind?
Giskard
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2022-02-28T07:28:21.280Z
This question needs to be narrowed down as it is too broad. What would happen during bank run will differ from country to country. In countries with deposit insurance and central bank fulfilling role of lender last resort like USA or ECB nothing would happen, people would see that they can get any amount of money so the run would stop. In fact given people know there is deposit insurance and lender of last resort it’s hard to imagine why would they made run on a banks in the first place. However, world contains around 200 countries with different legislation requiring answer for
1muflon1
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2022-02-28T07:29:34.590Z
200 different scenarios. Unless you can narrow it down this should be closed as too broad.
1muflon1
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2022-02-28T12:18:11.633Z
@1muflon1 are these insurances even backed enough to pay out ALL banks that are insured with them? And the cash the people want to withdraw still has to come from somewhere - so if there aren't stashes of cash stored with those insurances, where can the bills come from other than printing new money?
matthias_buehlmann
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2022-02-28T19:06:01.227Z
@matthias_buehlmann central banks can create unlimited amount of new money - that’s what lender of last resort means. If insurance would not be enough then central bank (or depending on which country we talk about some other institution on request from central bank) would just create more. Money is one thing modern banks can’t really run out of unless government wants them to, or borderline cases such as Venezuela where it was getting physically impossible to create new banknotes fast enough
1muflon1
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2022-02-28T21:03:31.060Z
@1muflon1 exactly, but that would lead to hyper inflation, no? Trust in any fractional-reserve currency would be in free fall
matthias_buehlmann
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2022-02-28T21:20:32.967Z
@matthias_buehlmann no printing money does not magically lead to inflation. That money already existed inside banks run on a bank just means that let’s say someone who has 1000e in bank will withdraw it. It government issues 500 money because previously that money only existed digitally (assume bank had 500 cash and 500 was purely digital on bank account) then total money supply is still 1000 not 1500. Unless you specify some specifics beyond simply asking what the effect of run itself are not much more can be said money supply could increase in aftermath once people start putting money back
1muflon1
CC BY-SA 4.0
2023-03-30T21:29:41.503Z
Hey so anyone got an answer to this?  I need to know.... like now..
Peter
<banking><money><liquidity>
What would happen in global bank run
matthias_buehlmann
# What would happen in global bank run

(Asked by: username_0 on 2022-02-28)

Bank runs are self-amplifying. What would realistically happen if the entire earth would experience a simultaneous bank run?

**Tags:** banking, money, liquidity
> **Comments:**
> **username_1**: What would realistically happen if [unrealistic assumption] type of questions are generally hard to answer. There is no precedent to go on.  
> **username_1**: Also, why is there a global run on the banks at all? Do Chinese people want to withdraw dollars to defend against the collapse of the renminbi's purchasing power while American  people want to withdraw renminbis to defend against the collapse of the dollar's purchasing power?  
> **username_0**: @Giskard it's in the realm of the possible. Bank runs are a prime example of self-fulfilling prophecies. You don't even have to believe it to happen - it's enough to believe that there might be enough others who believe it in order to have an incentive to contribute to the bank run. There is no precedent to go by, but economics experts likely can extrapolate the likely consequences?  
> **username_1**: Bank runs are absolutely possible! Global bank runs not so much, at least if you mean global literally. See [my second comment](https://economics.stackexchange.com/questions/50580/what-would-happen-in-global-bank-run?noredirect=1#comment81588_50580) for clarification. If you do not mean global literally, please edit to clarify.  
> **username_0**: @Giskard it's a thought experiment really. Let's say you have the full attention of the World and you predict a global bank run. The prediction alone may be enough to cause it to happen if people have reason to believe that enough others might just want to 'stay on the safe side in case it really happens'. It looks like an inherent instability risk in the global fractional-reseve Banking System and I wonder what the consequences would be of it getting triggered.  
> **username_1**: As I wrote in the first comment, the thought experiment you propose is not plausible. Also, can you clarify what exactly do you mean by "*what would realistically happen*"? This is very open ended, e.g., the sun would still shine and people would still buy coffee, but you probably have another specific aspect in mind?  
> **username_2**: This question needs to be narrowed down as it is too broad. What would happen during bank run will differ from country to country. In countries with deposit insurance and central bank fulfilling role of lender last resort like USA or ECB nothing would happen, people would see that they can get any amount of money so the run would stop. In fact given people know there is deposit insurance and lender of last resort it’s hard to imagine why would they made run on a banks in the first place. However, world contains around 200 countries with different legislation requiring answer for  
> **username_2**: 200 different scenarios. Unless you can narrow it down this should be closed as too broad.  
> **username_0**: @1muflon1 are these insurances even backed enough to pay out ALL banks that are insured with them? And the cash the people want to withdraw still has to come from somewhere - so if there aren't stashes of cash stored with those insurances, where can the bills come from other than printing new money?  
> **username_2**: @matthias_buehlmann central banks can create unlimited amount of new money - that’s what lender of last resort means. If insurance would not be enough then central bank (or depending on which country we talk about some other institution on request from central bank) would just create more. Money is one thing modern banks can’t really run out of unless government wants them to, or borderline cases such as Venezuela where it was getting physically impossible to create new banknotes fast enough  
> **username_0**: @1muflon1 exactly, but that would lead to hyper inflation, no? Trust in any fractional-reserve currency would be in free fall  
> **username_2**: @matthias_buehlmann no printing money does not magically lead to inflation. That money already existed inside banks run on a bank just means that let’s say someone who has 1000e in bank will withdraw it. It government issues 500 money because previously that money only existed digitally (assume bank had 500 cash and 500 was purely digital on bank account) then total money supply is still 1000 not 1500. Unless you specify some specifics beyond simply asking what the effect of run itself are not much more can be said money supply could increase in aftermath once people start putting money back  
> **username_3**: Hey so anyone got an answer to this?  I need to know.... like now..  

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## 0 answers

