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Cash is in the bank being lent out to others. This is good for the economy as a whole. Saving for a rainy day is prudent fiscal policy.
by tosseraccount 10y ago
Cash is in the bank being lent out to others. This is good for the economy as a whole.
Saving for a rainy day is prudent fiscal policy.
- guyzero 10y agoConsidering many central banks are moving towards zero or negative interest rates there's a significant cost to hoarding cash. But as you say it is a good strategy for individuals, it's not a good universal strategy - see https://en.wikipedia.org/wiki/Paradox_of_thrift https://en.wikipedia.org/wiki/Paradox_of_thrift
- rsync 10y ago"Cash is in the bank being lent out to others." Yes, in your textbook it is. In reality, in 2016, banks are hoarding that cash outright, or "lending" it to other banks, etc., for near-zero returns.