What does a bank do with your hard earned cash? When Ondiek deposits money, the bank takes Ondieks's and other depositors money and
loans it to Samuel.
The bank records this loan to Samuel as an asset in its books. The bank then turns around selling bonds to the likes of NSSF on the strength of the expected interest payments it expects from Samuel.
But what if the stock market crashes? Wasn't the loan to Samuel made on collateral basis? You see, when markets fall, corporate profits fall, incomes fall and Samuel is suddenly in a position at which he cannot repay the full loan plus interest. So the banks
loan asset collapses. But, alas, the bank can still sell the collateral from Samuel.
The only problem with this is that as incomes fall people rush to sell whatever property they have. As more property is brought to the market their prices fall. So even the bank's collateral value shrinks.
People start to withdraw their deposits from the banks to cover for the shortfall in incomes. At some point ppl will perceive that the bank may default on their money. So more pple try to withdraw as much as possible. Then the bank cannot manage and collapses.
The reason is that, ordinarily, banks keep only enough reserves to cover for the everyday withdrawals. The rest is loaned because that is where money (in the bank's eyes) is to be made.
If you deposit a million bob in a bank and the bank defaults by only 1%, you lose 10,000 bob.
Something else to ponder, when you deposit money in the bank, the bank writes some figures against your name and that is all. You only have value as long as people percieve that the notes have value. It is fiat. Hence the growing popularity of digital money. The time has come when the stranglehold held by central banks must be resolved.
History is a good lesson. The banks that collapsed in the '90s, how much were the depositors paid back?
Anyway, the issue of deflation is painful as well as a difficult subject. Whenever a person predicts deflation they go right against what ppl perceive to have value. You go right against what ppl hold dear to them. So it is to be expected whenever ppl overreact to such issues. But a prudent mind would require at least some caution. At the very least you can do yourself a favour by researching on the subject.