[neilwilson]

"The small but real risk of losing your deposits in a bank encourages companies and people with money to invest it into other things."

I'm surprised that belief still persists.

The counter to that, of course, is that the silly instability in the banking system we're now seeing worldwide will destroy risk taking as people scramble to protect their positions.

Look at the damage to stock market valuations. How many banks are thinking about creating loans at the moment?

Banks provide liquidity against real things by creating money. They don't invest, and they don't take in money. All they do is shuffle their balance sheet to try and improve their net interest margin.

This idea that banks will suck up all the money is yet another consequence of thinking about banks backwards. There isn't, and never has been, a fixed amount of money.

Just as you get fancier trapeze moves if you have a safety net installed, you get far more risk taking when the basics operate correctly, safely and without having to think about them.