I ask because since our money is backed in value (a precious resource like gold and oil) and doesn’t leave the country, doesn’t it also mean that our wealth remains intact as a nation regardless of whether or not the bank has it? (Ie, us citizens have it, so it doesn’t matter if it’s in a bank or not- the wealth is held by a U.S. citizen).
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All modern money is not backed by anything physical, like previous metals, but by your faith that your government will honor its “value”. Look at the stock market crash before the great depression for an example of what happens when citizens lose faith in government promises and everyone wanys to remove money in the form of cash (the physical representations of value) from banks. The us fdic was created as a result of the great depression’s run on cash in banks to further reassure the population that the federal government will guarantee deposits up to a certain amount in the nation’s banks.
The federal reserve does not have one physical “dollar” printed for each “dollar” in the economy. It is much less, around 1 physical dollar for every six “on the books”. Most money is electronic and not physical.
If you want to take all your money from your bank in the form of physical cash, the bank (and the federal reserve) does not have enough printed cash to give every deposit holder. That’s why your bank places withdrawal limits on large values of cash. They need to get shipments of cash via armored trucks from federal reserve banks, who in turn get the cash from other banks whos customers deposited cash. If everyone is taking out cash, the early birds will get it, whereas everyone else will get nothing physical, just a promise that yes, your money is srill here in the bank, you just can’t get a phyical representation of it at this time.
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