Unchained Jim Bianco on Why the Banking System Has Always Been Broken - Ep. 469
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Mar 17, 2023 
In this engaging discussion, Jim Bianco, president and macro strategist at Bianco Research, sheds light on the recent bank failures that he terms a liquidity crisis rather than a solvency one. He critiques the traditional fractional reserve banking system, deeming it flawed and outdated. Bianco highlights how decentralized finance offers viable alternatives and questions the motivations behind the sudden shutdown of Signature Bank. The conversation also touches on the Federal Reserve's precarious position and the implications of rapid money movement in today's economy.
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Episode notes
Liquidity Crisis, Not Solvency
- The recent banking crisis is a liquidity crisis, not a solvency crisis, unlike 2008.
- Banks hold good assets, but they cannot meet immediate withdrawal demands.
Broken Banking System
- The fractional reserve system, used by traditional banks, has been inherently broken for centuries.
- It creates instability and requires constant intervention to prevent collapse.
DeFi as a Solution
- DeFi protocols like Aave and Compound offer a more stable, fully reserved banking model.
- These platforms don't leverage funds, reducing systemic risk.
