A possible run on some banks and quantitative easing

As a general rule banks keep a small portion of their deposits as cash reserves with which to refund depositors.  Therefore if a lot of depositors demand their money back (a run on the bank) the the bank is in deep trouble.  That’s why one of the requirements to be a banker is the ability to lie with a straight face.

It’s also a reason to be concerned about this report of money being moved from European banks to American banks.

Another concern from this report is that some large American banks are charging for deposits in excess of $50 million because they don’t know what to do with it.  This doesn’t look good for another round of quantitative easing which would try to stimulate the economy by pumping more money into the banking system.

Is this money being moved from Europe to the United States as an act of faith in the U.S. economy or because its owners don’t know what else to do with it?


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