> the banks can ask for it in cash if need be
Ehhh, can they? I suspect any bank that tried would pretty soon find that it actually couldn't.
They couldn’t get their whole balance in cash I’m sure. But the Fed is the one that handles retiring old paper currency and giving banks fresh currency to give to ATMs and tellers, and I doubt the inflows and outflows are perfectly even for each bank.
The Fed manages printed currency - they’d be irritated, but they literally do provide the physical dollars people need now, and if they felt it was appropriate, they’d produce them as needed.
Just like those airplanes of bills shipped to Iraq, etc. in the past.
I think we’re talking about bank reserves, which is a fraction (in the order of 1%) of the total amount of money held in the customers’ transaction accounts. Reserves are convertible into cash. Not that any bank would suddenly want to do that, unless there’s a bank run, in which case it’s the customers who want the entirety of their accounts (100x the reserves) converted into cash, which is impossible not because the fed refuses to convert the money, but because the bank doesn’t have enough reserves.