Here's something that came across my radar this afternoon that should be a bit shocking but is actually not very surprising; many people in the banking industry are not aware of the fact that the Federal Reserve changed the reserve requirements of all depository institutions connected to the Fed to 0%. Now, this doesn't mean that all depository institutions that have a connection to the Federal Reserve system are holding 0% of their deposits as reserves. However, it highlights just how disconnected people have become from reality.

The poll run by Gerald on LinkedIn was inspired by a conversation on Rabbit Hole Recap a few weeks ago when a freak brought to our attention that his money and banking professor wasn't aware that the Fed changed reserve requirements during the chaos that ensued when the governments of the world decided to lock down the global economy.  While an anecdote from the freak taking a money and banking class and a LinkedIn poll may not be pass as robust scientific evidence, I do think they are important data points. There are people - individuals many regard as experts in a particular domain - who do not know that one of the most critical components of establishing a somewhat stable banking system was completely removed from the market on a whim almost three years ago. Knowing this, one has to ask themself, "Just how bad is it?"

How many people throughout the banking industry in the United States are completely unaware of the landscape within which they operate? How many people are taking risk with client deposits using assumptions that are completely disconnected from reality? If so many "experts" can be so woefully wrong about something as fundamental as mandated reserve requirements (or, in this case, lack thereof), what other assumptions are they making that could result in some unforeseen (to them) disaster throughout the financial system?

Today's issue isn't an attempt to stoke fear about or call into question the state on balance sheets throughout the banking sector. It is to draw attention to how many have mailed it in and are driving blind behind the wheel. The fact that professors and c-suite bank executives are unaware of the lack of reserve requirements doesn't mean a banking crisis is imminent because there are no reserves. It means that a banking crisis is probably looming at some point in the medium-term because the intellectual capital in the industry has been dulled to a point that those in the industry don't even truly understand the nature or mechanics of the system they have erected.

Juxtapose the financial system that has been built from the nexus of the Federal Reserve with bitcoin and it is night and day. Anyone who is able to sit down, assess the reality of the situation, understand the mechanics of both systems, and compare the two should be able to make the rational decision that bitcoin is such a painfully obvious improvement on the incumbent system. Public addresses have an embedded reserve ratio of 100%. You either have a UTXO that is spendable or you do not and the network can determine that in real time. Every ten minutes. People in the banking industry don't even know that they technically don't need to hold any actual money in reserves and can reissue their customer deposits as credit to any extent their heart desires. A textbook "blind leading the blind" scenario.

We are so so so so early.

Final thought...

Picked up some eggs from the farmers' market with the most orange yolks I've ever seen last weekend.