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Holding cash does not mean that it isn't allocated to investment. The airlines wouldn't be putting it under their mattress. They would be depositing it with a f
by dlp211 7y ago
Holding cash does not mean that it isn't allocated to investment. The airlines wouldn't be putting it under their mattress. They would be depositing it with a financial institution that would then be able to use the increased reserves to provide more capital to various actors, ie: investment.
- glass_of_water 7y agoBut if a rare, global event like this happens and companies' emergency funds are mostly investments, isn't everyone going to try to liquidate their investments, crashing prices to a level where those investments aren't worth enough to keep them funded through the event?
- dlp211 7y agoIf everything stopped, that would be an issue, but in reality there is still a ton of economic activity happening. As far a big businesses go, there are a handful of industries that are being impacted by this pandemic and if they were slowly drawing down on cash reserves over the next 6 months or so that probably isn't terribly harmful. Also, this is why Central Banks exist.