Canada’s inflation rate decelerated to 3.4 per cent in the year up to May, Statistics Canada said Tuesday, led by sharply lower gasoline prices. But beneath the headline slowdown in consumer prices, many facets of the cost of living are still increasing at an eye-watering pace. Grocery prices went up at an almost nine per cent pace.
Historically speakimg, it’s rarely good when the general public panics over their money, even if it’s reasonable. When everyone tries to withdraw everything, it’s called a “bank run”.
Banks use “stand-in” money to make/keep money. The know most people would want to keep some of their savings, so they temporarily use some of that money to lend out and to make their own money. That sounds rough, but with many thousands of people, it can work without anyone missing their money when they need it. Those loans are used for home ownership, opening businesses, and more.
If everyone believes the bank is running out of money, they will likely rush to withdraw theirs before it’s too late. This can just multiply the problem, and a bank may end up shuttering for good.
I’m not saying that we are anywhere near that point, but people don’t always need a guaranteed reason to panic.