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The Bank Run

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Published on Aug 1, 2009

http://www.greatcreditcontraction.com

Fractional reserve banking is the banking practice in which banks keep only a fraction of their deposits in reserve (as cash and other highly liquid assets) and lend out the remainder while maintaining the simultaneous obligation to redeem all these deposits upon demand. Fractional reserve banking occurs when banks lend out any fraction of the funds received from demand deposits. Despite being a form of embezzlement and fraud this practice is universal in modern banking.

Problems can arise, however, when a large number of depositors seek withdrawal of their deposits; this can cause a bank run or, when problems are extreme and widespread, a systemic crisis.

There are probably some massive amounts of bank failures coming. Just look at the trends in the bank failures chart here:

http://www.runtogold.com/2009/07/the-...

This can cause a credit contraction.
http://www.creditcontraction.com

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