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Unless I'm missing something, why doesn't every bank have an "internal narrow bank" that takes deposits and puts them at the central bank? Actually, I thought
by captainmuon 8y ago
Unless I'm missing something, why doesn't every bank have an "internal narrow bank" that takes deposits and puts them at the central bank?
Actually, I thought that is exactly how banks have to operate right now... All deposits are settled in the interbank system or ultimately with the central bank. You can't just deposit money in a bank, because "depositing" $100 means telling an upstream bank that your bank now owes you $100.
- incompatible 8y agoThey can do, quite a lot of money is on deposit at the Fed. But they may find it more profitable to lend the money elsewhere. All true government issued money is either in the form of banknotes and coins or deposits held at the central bank.
- pas 8y agoWhat is gov issued money? The money created by the fed is gov issued too, no? And it sits on the Fed's balance sheet as liability, debt, but not as deposit.
- incompatible 8y agoFor simplicity I'm taking the Fed as part of the government. I know the setup in the USA is a bit strange. A government can create as much money as it likes, debt on a balance sheet is an optional accounting detail.
- thelasthuman 8y agoSo the federal reserve isn't part of the government?