Paul Krugman

@paulkrugman ↗

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Last Checked Oct. 27, 2022

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Mon Oct 10 13:27:51 +0000 2022

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Paul Krugman @paulkrugman

Banks square this circle by offering people deposits that can be withdrawn at will, but investing most of the funds in illiquid loans to businesses etc. This normally works because not everyone needs cash at the same time 4/ — PolitiTweet.org

Posted Oct. 10, 2022

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Paul Krugman @paulkrugman

The idea is that people want liquidity — ready access to their wealth if needed — but that productive investment requires tying up a lot of wealth in illiquid assets that can't be quickly converted into cash 3/ — PolitiTweet.org

Posted Oct. 10, 2022

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Paul Krugman @paulkrugman

By reconciling the need for liquidity with the need for illiquid investments, banking makes society richer. But ... it creates the risk of crisis. If, for whatever reason, people lose confidence in banks, they will all try to withdraw funds at once 5/ — PolitiTweet.org

Posted Oct. 10, 2022