Krugman seems confused

Hello? Bank capital doesn’t consist of canned food or steel ingots held in a vault somewhere, and raising capital requirements doesn’t mean that food or raw materials have be stored in a bunker.NYT

Uh, yes it does. That is the whole point of banking, to match the flow of funds with the flow of real goods. If we made no attempt to match the two then we could never use money for exchange. See my post below in Felix.

Both errors are equivalent. Insurance schemes and reserve requirements both have the same purpose, raise the level of real goods inventories for unplanned events.