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What happens to the cash that is sitting on their balance sheets? They don't keep it under a mattress. It get stored in banks, and forms the fractional reserve
by zkhalique 11y ago
What happens to the cash that is sitting on their balance sheets? They don't keep it under a mattress. It get stored in banks, and forms the fractional reserve for new loans. Who are those loans given to? Smaller businesses, mortgages on houses, etc.
At least, that would be true if the banks would lend. And if the companies would keep the money in local banks and not overseas. Our tax code encourages offshoring the money!!
- justinv 11y agoActually, a lot of it is known as "cash equivalents", which are generally liquid assets (but not actual cash for the most part) like T-Bills or other forms of securities (though, money market accounts are also used, which do go to banks).
- zkhalique 11y agoAnd what happens to those cash equivalents? They really don't generate any movement of money but just store value?