Depositors can be made whole without receiving little green pieces of paper.
Checks, account transfers, wire transfers, etc.
There is no fundamental limit on the Federal Reserve to create (or destroy) money as needed. The Fed, as other central banks, does however exercise that power very judiciously, and with specific targets (inflation, unemployment) as its foundational charter.
Note that both inflation and unemployment are not assessed by the Fed, but by an independent federal department, Labour. It's a classic instance of not giving a single entity control over both the means of control and the measurement of success.
> Depositors can be made whole without receiving little green pieces of paper.
However, in principal The bank promises redeemable cash, that's why people stay in banks. But it's a lie. Again bank runs exist because of this lie.
Everybody knows the Fed screws it all up. A wire transfer among competing banks would make the competing bank demand that the other bank redeem the transfer in green paper money.
However, because the Fed is the bank of banks, it just becomes number a change on the balance sheet of the fed.
Checks, account transfers, wire transfers, etc.
There is no fundamental limit on the Federal Reserve to create (or destroy) money as needed. The Fed, as other central banks, does however exercise that power very judiciously, and with specific targets (inflation, unemployment) as its foundational charter.
Note that both inflation and unemployment are not assessed by the Fed, but by an independent federal department, Labour. It's a classic instance of not giving a single entity control over both the means of control and the measurement of success.