It’s all paper and it’s all based on faith. From NO1 at noO1.substack.com:
When infinite paper meets reality
Remember Greece in 2015? Banks closed. ATMs limited to €60 per day. Then €50. People queuing for hours to withdraw their own money from their own accounts. Pensioners fainting in bank lobbies. Businesses unable to pay suppliers. The economy grinding to a halt because nobody could access cash.
That wasn’t theoretical. That was real people discovering they were unsecured creditors in a banking system that had taken exorbitant risks with their deposits.
And I have a feeling it’s about to happen again. Not specifically in Greece. In banks across Europe that you’ve never heard were in trouble. Because they made bets on the two most boring asset classes imaginable.
A metal. And bonds.
Your deposit isn’t sitting in a vault with your name on it. It’s part of a giant pool that banks use to make investments, provide liquidity, and generate returns. When those investments go bad, your deposit becomes a liability banks can’t honor. You become an unsecured creditor standing in line behind secured creditors who get paid first.
The secured creditors are the big institutions. The prime brokers. The derivatives counterparties. They get the collateral pools. They invoke their legal priority. They take everything.
You get a number in a queue. And maybe €60 a day if you’re lucky.
They banks look at it as their money.