When 100% reserves aren't enough

Toby Baxendale at The Cobden Centre is a big fan of 100%-reserve banking. The idea certainly has its attractions, but he often suggests that cash sitting in vaults is absolutely safe. The usual objection from Fractional Reserve Free Bankers is that the bank may be robbed, or destroyed in a fire, so while a 100%-reserve bank may not be at risk from a run, it still cannot provide any guarantees.

In India, it seems, there's another threat:

Staff at an Indian bank have been blamed for allowing termites to eat their way through banknotes worth millions of rupees.

Staff at the bank, in the state of Uttar Pradesh, are reported to have been found guilty of "laxity".

The insects are believed to have chewed their way through notes worth some 10 million rupees ($225,000/£137,000).

A similar incident happened in 2008, when termites in Bihar state ate a trader's savings stored in his bank.

No doubt the gold bugs will be quick to suggest an answer to this entomical menace.