As I am reading news from around the world, it appears that some countries are promising that depositors do not have to worry about their money held in bank accounts.
I am wondering if I am thinking about this the wrong way…It doesn’t seem to hard for a government to say we are insuring your deposits, no matter how much money you have in there, if the money, once the crisis is over, is simply not worth anything anymore.
Currency default concerns are at a very high peak right now. The governments have nothing to lose by making such promises, and everything to lose by not making them. There is no country that cannot afford right now not to promise to insure or guarantee deposits.
Well, obviously: what passes for money today is just paper - all they’re promising to do is print up a bunch of paper to cover all the unbacked “checkbook money” (actually not all; e.g., the US FDIC covers $100,000 maximum); there’s very little direct cost involved. The indirect cost, though…