A specific mathematical redesign of money can eliminate the possibility of bank runs forever.
April 26, 2026
Original Paper
From Fragility to Design: Eliminating Bank Run Equilibria through Purpose-Oriented Money
SSRN · 6644060
The Takeaway
Banking instability is a design flaw rather than an inherent feature of finance. By using purpose-contingent claims and endogenous liquidity, banks can remove the advantage of being the first person to withdraw cash. Most people accept that banks are fragile and require government bailouts to survive a panic. This model proves that a more sophisticated accounting architecture can make a bank physically impossible to break. This shift would end the cycle of financial panics that have haunted global markets for centuries.
From the abstract
This paper argues that financial fragility and bank runs arise from specific institutional features—fixed liquidity constraints, demandable deposits, and sequential service—that generate strategic complementarities and multiple equilibria. It proposes a purpose-oriented monetary architecture with endogenous liquidity, purpose-contingent claims, and no withdrawal priority, eliminating first-mover advantages and yielding a unique equilibrium without run dynamics. A formal model and general equilib