22 lines
696 B
Markdown
22 lines
696 B
Markdown
<!-- generated: provider=openrouter model=arcee-ai/trinity-large-preview:free date=2026-02-19 source=book-2-chapter-02 -->
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# Bank Failure Mechanisms
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## Definition
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The processes by which banks can become insolvent, including excessive note issuance, inadequate reserves, and over-extension of credit. These mechanisms often involve a cycle of drawing and redrawing bills to maintain liquidity.
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## Source Chapter
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Book II, Chapter 2
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## Context
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Smith analyses how banks can fail through various mechanisms, particularly focusing on the cycle of excessive credit extension followed by attempts to maintain liquidity through increasingly desperate measures.
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## Economic Domain
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Regulation
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---
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