What we don't know is whether the central bank would print all the required money in the event of a systematic bank run. How would they behave? Would a bank run result in all of the bank deposits being replaced with (conventional forms of) cash?
There is uncertainty surrounding what would likely happen in the event of a bank run.
How would the central bank react to a bank run?
If we assume the deposits would be replaced with cash then, currently, commercial, private banks are issuing currency. This would be consistent with the deposit guarantee...
If there is no replacement of deposits for cash, then many people will be disappointed and will have been tricked by their banks. That is not to say that they have not been tricked in the alternate (printing) scenario, for many people do not realise that the banks are inflating the currency when they take a loan, only that the deposit guarantee will have been a lie instead. Either the deposit guarantee is a lie or banks are printing cash.
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