Dana El-Kurd

this isn't for you I'm not humiliating myself for your entertainment like for the political economy people here when I say stuff that might that's like technically kind of fuzzy it's for me the podcast idiot yeah like you understand this like I'm working at the level of hamburgers here so like we have to do some abstractions

So, okay, the important thing for our purposes, right, is that there's two things here, right?

There's like the deposit, which is the money you give them, and then there's the loans.

Right.

And these operate on different timelines, right?

You can take the deposit out at any time, at least in theory, but they can't get the money from the loan back at any time.

Right.

Now, this is like one of the critical things of what a bank is, is this timeline thing, right?

It turns your money, which you can take out at any time, into a different kind of thing, this loan, which can't be taken out immediately, right?

And then they use that to make money.

So...

this is called maturity transformation this is a very simple concept they have made very complicated this is one of the core aspects of that definition i was talking about earlier this is one of the four things in it but you now understand this it's not that complicated it's it's it's take short term make long term and we'll get to doing the reverse in a second oh i don't think it works the other way yeah

so badly it's gonna go so badly i don't know about bank but just generally speaking like in terms of time and like how like material reality works i don't think it works the other way it's it's not great it's not great molly it's not great okay so okay there is however a problem here right which is what happens if everyone tries to get their short-term money back at the same time

We can't.

Yeah, right.

That's why we have deposit insurance.

Yeah, right, because the banks aren't holding short-term cash.

What they're holding is long-term loans, and those loans, like, you can't pay someone a loan.

Well, okay, actually, the crux of this episode is they found a way to do that.

Is that they did do that, yeah.