simondav wrote:It is similar

It is similar to when Northern Rock went bust (why did they just not create the money themselves ?)

Positive Money says that Northern Rock went bust because it expanded its loans faster than the other banks (so violating one of the assumptions of your ideal scenario). If you think that banks "create money" from thin air rather than from funds they already have this is the only logical explanation you can give. But since banks do make loans from funds they have it is perfectly possible for one bank to expand its loans faster than others, as long as it gets the extra funds. Northern Rock did so by borrowing heavily from the money market. It got into trouble when the interest rates at which it could borrow from here rose. What has been called "funding strains arising from reliance on short-term wholesale funds". Positive Money of course deny that this could happen or would be a problem because they don't accept that banks need funds to make loans.