This is a quote from North's daily article a few days ago:
"Today, large depositors can pull digital money out of bank A, but only by transferring it to bank B. Digits must be in a bank account at all times. There can be no decrease in the money supply for as long as money is digital. Hence, there can be no decrease in prices unless it is Fed policy to decrease prices."
What he's saying here makes sense, that it's basically impossible to have a modern day bank run because so much of the money supply is digital. But what about loan default? If there are trillions of dollars in bad derivatives floating around, and they eventually get defaulted on, doesn't this also decrease the money supply? Or, I guess a more broad question, is what happens to fractional reserve created money when a loan goes bad? Doesn't it disappear (as long as things are marked to market, which they probably aren't)