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It's not a serious question. You see when small banks fails, big bank came and absorb it.

So I just wonder what will happen if we got only one bank left.

All money businesses are within that bank and it never worries about withdrawal as long as people don't have the habit to have all their money in cash.

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    "The theoretical answer to 'how many angels can dance on the head of a pin' is 'as many as want to'. The practical answer is 'as many as will fit.'" Your premise implies so many unspecified changes to society that the answer is pure opinion.
    – keshlam
    May 2, 2023 at 13:20

4 Answers 4

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In Great Depression-era America, before the era of online banking, there might be only one choice of bank for people living in a small town. So when a bank was revealed to be undercapitalized, there would be a literal "run on the bank" where people raced to turn their deposits into cash before the bank ran out of cash.

If there is only one bank, and it does not have the ability to handle all depositor withdrawals, via backing from the money-creating sovereign, there will be a bank run.

This is where the other answer's comparison to Soviet Sberbank breaks down. There was never any possibility that deposits in Sberbank had counterparty risk. Because it was the state bank, any shortfall in assets would surely be covered up with money creation.

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    It was that exact money creation that lead to the collapse of the Soviet Union. So yeah, the bank wouldn't collapse, but the whole economy did, and on multiple occasions (1980's crisis led to the whole country falling apart, 1990's crisis led to the current dictatorship)
    – littleadv
    May 2, 2023 at 6:42
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    @littleadv and the massive money printing after the 2007/8 crash came close to having a similar effect on US and European banks and economies...
    – jwenting
    May 2, 2023 at 12:28
  • @littleadv: If the citizens of Fredonia were have $1,000,000,000,000 in the state bank, and they were to withdraw all of their cash and put it under their mattresses, but their spending patterns didn't change, would the state of affairs where Fredonians collectively have $1T in bank notes under their matteresses be different from that were their deposits were recorded on bank ledgers?
    – supercat
    May 2, 2023 at 15:48
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    @supercat no, because while the money is on bank ledgers in can be utilized elsewhere whereas when it is in the mattress - it's in the mattress. The whole point of banking system is that the same money works multiple times.
    – littleadv
    May 2, 2023 at 17:26
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    @supercat There would probably be some change in the production of goods and services due to businesses not being able to borrow more money. Or the state could print it. There's no difference between mattress money and money that wasn't printed yet, so if we consider shoving money under the mattress as unprinting it, printing more to compensate seems okay. However, now the state no longer has any control of the trillions, so it can't stop inflation from happening if everyone spends their trillions.
    – user253751
    May 2, 2023 at 20:50
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In the Soviet Union there was only one (State run) bank. Nothing happened, other than the whole economic system collapsing, the people were using it and were content since they knew nothing else. It still exists, by the way, and is one of the world's largest banks.

But in a free market environment monopolies don't work well. They get complacent, become arrogant, and squeeze the market, which opens opportunities for the competition and invites regulators to break them up. Ma Bell is one example, breaking it up led to significant changes in the communication landscape for consumers.

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    If it has regulators, it is not actually a free market. May 2, 2023 at 11:09
  • in a regulated market, eventually there is only a place for those businesses who are the largest donors to the regulators.
    – jwenting
    May 2, 2023 at 12:22
  • @EikePierstorff ideally regulation and guarding against monopolies wouldn't be needed, but sadly we don't live in an ideal world and if there are no safeguards you end up in a situation where a few very large conglomerates own everything and everyone is beholden to them for everything, effectively enslaved by them. Which is no better than being enslaved to a communist government.
    – jwenting
    May 2, 2023 at 12:26
  • @jwenting no argument here, that was just a comment on terminology. Free markets tend to create oligopolies, so regulators are necessary, so the market is not free to protect it against self destruction (basically a Marxist idea, but still not wrong). May 2, 2023 at 12:45
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    @EikePierstorff that's a common misconception, but unregulated market is called "jungle". Free market is a market where all the participants are playing on the same leveled field. Which is done through regulation and legal framework.
    – littleadv
    May 2, 2023 at 17:25
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So I just wonder what will happen if we got only one bank left.

You forgot about credit Unions. Money would flow into them as the banks continued to have problems. But of course even a credit union can have problems.

Long before the number of banks and credit unions goes to one, somebody else will start a new bank. They will see opportunities.

All money businesses are within that bank and it never worries about withdrawal as long as people don't have the habit to have all their money in cash.

Not everybody has to pull their money out to cause a collapse. Just more deposits than the amount of cash the bank can get. Once they have to sell assets at a loss then the bank becomes unstable, which triggers more withdraws.

The most recent examples in the spring of 2023 still had deposits. They still had assets. They just didn't have a way to correct for their errors.

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  • If a credit union fails would they have to be taken over by another CU rather than a for-profit bank? So in the extreme we could end up with one huge bank and one huge CU?
    – Barmar
    May 2, 2023 at 14:40
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as long as people don't have the habit to have all their money in cash.

But that's the trick, isn't it?

Before the existence of the "digital age", what you got from your bank was cash.

Thus, people could revert to a cash economy.

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