That's hard to believe - they can't create/print money, can they?
Let's use a simple example, because those are easiest for me - you go to a bank and get a mortgage. That means the bank gives the sellers a check for their house, and then you owe the bank that money plus interest. When the sellers go to their bank, they can cash that check if they want, so it's real money.
That money has to come from somewhere, I would think.
It goes from your bank to their bank, and then to them, doesn't it?
I know this new electronic era makes things less concrete, but the digital deposits can be withdrawn as actual cash, unless I'm missing something.
Hoarding Cash
Moderator: Global Moderator
Re: Hoarding Cash
That says that they don't "necessarily" have to use deposits to make loans, but that they generally do.
And, that they need funding sources to run their business. Also, that if they need, they can borrow money from other banks or the Fed to cover things.
I didn't see anything about creating money from thin air.
And, that they need funding sources to run their business. Also, that if they need, they can borrow money from other banks or the Fed to cover things.
I didn't see anything about creating money from thin air.
Last edited by jafs on Thu Mar 03, 2016 8:35 pm, edited 1 time in total.
Re: Hoarding Cash
All very interesting but I'd like to at least temporarily re-rail the thread back to Bear Bones' original question (at least as I understand it). What is the effect on the economy if US savers decide as a group that they want to hoard greenbacks at home? Let's say every American takes $1000 cash out of the bank and sticks it under their mattress. That's about 320 billion dollars. Does that do nothing? And, if that is the case, what happens if they decide they don't want to hoard it anymore?... that all is well with the economy and they start spending down their cash. Still nothing?
Re: Hoarding Cash
deposits, reserves and cash on hand are three different things that fluctuate together, aren't they? deposits become mostly electronic (cash on hand goes up then gets reduced if it exceeds the banks needs)
reserves are a number in a computer that includes cash on hand but is not entirely made up of it (i think)
cash on hand is exactly what it sounds like the amount of cash dollar bills rolls of quarters etc that the bank needs for a days business, if they have to much they send it off.. to little they order more.(send digital money in exchange for paper and vs versa).
?? so if everybody horded cash, the cash on hand might get tight with little or no effect on reserves until the gov changed the ratio of printed money to digital money ??
i am not sure of any of this...
reserves are a number in a computer that includes cash on hand but is not entirely made up of it (i think)
cash on hand is exactly what it sounds like the amount of cash dollar bills rolls of quarters etc that the bank needs for a days business, if they have to much they send it off.. to little they order more.(send digital money in exchange for paper and vs versa).
?? so if everybody horded cash, the cash on hand might get tight with little or no effect on reserves until the gov changed the ratio of printed money to digital money ??
i am not sure of any of this...
Last edited by l82start on Thu Mar 03, 2016 8:56 pm, edited 1 time in total.
-Government 2020+ - a BANANA REPUBLIC - if you can keep it
-Belief is the death of intelligence. As soon as one believes a doctrine of any sort, or assumes certitude, one stops thinking about that aspect of existence
-Belief is the death of intelligence. As soon as one believes a doctrine of any sort, or assumes certitude, one stops thinking about that aspect of existence
Re: Hoarding Cash
That's not very clear somehow.
I get that they don't lend reserves, and I've said that before. And, I get that when they make a loan, they create that amount of deposits in the borrower's account - that's what a loan is - a bunch of money in a bank account that you can use.
But, I thought we were talking about money that we deposit into our accounts, from paychecks or other sources of income, and what would happen if people started taking that money out of bank accounts. My understanding is that those deposits aren't just sitting there waiting for us to take them out - they're being used. And, if we all took our money out of the accounts, the banks would lose something useful.
That doesn't mean that they couldn't find other ways to do things, of course. But it's useful for them to have money we put into accounts, particularly when they don't have to pay us interest to use the money. That's essentially what the pragcap link said, that they look for the cheapest ways to operate, and so they use our deposits, rather than borrowing the money, which all makes sense to me.
I get that they don't lend reserves, and I've said that before. And, I get that when they make a loan, they create that amount of deposits in the borrower's account - that's what a loan is - a bunch of money in a bank account that you can use.
But, I thought we were talking about money that we deposit into our accounts, from paychecks or other sources of income, and what would happen if people started taking that money out of bank accounts. My understanding is that those deposits aren't just sitting there waiting for us to take them out - they're being used. And, if we all took our money out of the accounts, the banks would lose something useful.
That doesn't mean that they couldn't find other ways to do things, of course. But it's useful for them to have money we put into accounts, particularly when they don't have to pay us interest to use the money. That's essentially what the pragcap link said, that they look for the cheapest ways to operate, and so they use our deposits, rather than borrowing the money, which all makes sense to me.