Quote from: zanezane on May 30, 2023, 05:08:19 PM

Banking Investment:[/b]
-Stability and security
-Lower risk

One of the more common myths about the modern banking system is stability and lower risks. It would be a good time to remind everyone who has money at a bank that your bank likely follows the fractional reserve banking system, which would allow for the vast majority of deposits to be swept away in investments the banks deem to be prudent. You have zero say in any of these investments, and if for any reason some degree of confidence is lost on the institution and depositors decide to withdraw, there will be liqudiity issues and either you or another depositor will be out cash. Since COVID, all U.S. based banks are not required to keep a single penny of user deposits on hand. It used to be they were required to keep 10% of hand (which is too little to begin with), now it's zero. For all this risk, you're given a small interest payment. Since depositors are entitled to their deposits, in the event the bank collapses, any investments returns go back to the depositors, profit is wiped away completely. Say you have 5k invested at a bank with a fixed interest rate promised by the institution, and a run on the bank occurs. Due to fractional reserves, the bank has little cash on hand. What happens to your investment when everyone withdraws? Perhaps think twice before relying on banks for investments or to hold your cash. They can act reckless by inherent design of the system. They aren't stable/secure.