Currently the issue is that the fed has removed the overnight liquidity requirements. This opens up the threat of a bank run. All of this is due to years of aggressively propping up the economy for political means, in reality we should have had a market decline a few years ago, but the government massively mismanaged their responsibilities and pushed us into more than one bubble, while hamstringing their ability to respond.
Yes, and in 1Q2017, the fund held $84.9E9. Meanwhile, in the US, gross private savings total $4.64 trillion, while personal savings total $1.06 trillion.(Sep 11, 2019)
What happens when a major bank goes under and completely depletes the FDIC fund? (e.g. Bank of America)
Another key aspect of monetary metals is lack of counter party risk. When you deposit money with BoA, it is no longer yours; you become an unsecured creditor of the bank. BoA's derivatives counter parties are senior to you, so they will get paid first if say interest rate swaps go against BoA, and they need to post more collateral to that counter party.
Also, the problem with rates 'normalizing' is the magnitude of outstanding Treasury debt, and the fraction of GDP that the interest payments represent. 5% would be devastating, even though historically, that is a typical rate.
If you're not transacting for physical cash, isn't your money going directly into an account at another bank?
Unless people are withdrawing mass amounts of cash, I'm relatively certain you can't have bank runs against the banking system as a whole, you can only have runs against a particular bank.
