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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Bank runs were common during the 1930s when banks were smaller and had fewer funds on hand. Their directors used depositor funds on high-risk ventures such as the stock market. When the market crashed in 1929, there wasn’t enough left to cover deposits.
Today, your corner bank is almost always part of a mega bank with billions in assets. There are many more regulations on how funds can be used. Runs are rare and deposits are guaranteed by the feds.
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