
Ep23 “When Banking Fails” with Amit Seru
All Else Equal: Making Better Decisions
00:00
The Disciplining Effect of Banks
The reason banks exist is historical. One of the things that was difficult to verify was trust. If an investor can come to you and ask their money back at any point in time, it has a lot of disciplining effect on the person who runs the bank. So this threat of the run could actually then be used for something positive. And so what happened in the interim is we started to develop institutions to make other forms of investment possible.
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