4 ms·

From my understanding, they hold most of that in reserve accounts with the Federal Reserve. But yeah, someone at some point holds some cash. But of the total US

by jwolfe 5y ago

From my understanding, they hold most of that in reserve accounts with the Federal Reserve. But yeah, someone at some point holds some cash. But of the total US money supply (in 2018), physical currency makes up about 11% of the total value[0]. [0] https://www.businessinsider.com/heres-how-much-us-currency-there-is-in-circulation-2018-4 https://www.businessinsider.com/heres-how-much-us-currency-t...

reedjosh 5y ago
And whenever this comes up, I just like to remind people that we went to a reserve requirement of 0% nearly a year ago with the start of COVID. https://medium.com/navigating-life/we-just-went-from-fractional-reserve-banking-to-zero-reserve-banking-and-its-a-pretty-big-deal-c501432e9be6 https://medium.com/navigating-life/we-just-went-from-fractio... Edit: Downvoted, and I'm guessing it's the source? This is legitimate fact though. Here's the fed's own announcement. > In light of the shift to an ample reserves regime, the Board has reduced reserve requirement ratios to zero percent effective on March 26, the beginning of the next reserve maintenance period. This action eliminates reserve requirements for thousands of depository institutions and will help to support lending to households and businesses. https://www.federalreserve.gov/newsevents/pressreleases/monetary20200315b.htm https://www.federalreserve.gov/newsevents/pressreleases/mone...
- tylerhou 5y ago
  Which is completely fine, because the Fed is willing to step in as the lender of last resort.
  - reedjosh 5y ago
    It may be fine for the faith in banking structures, but it's not that great it you like your dollars to hold value.
    - bun_at_work 5y ago
      This comment betrays your misunderstanding of the financial institutions and systems at play here. The Fed's goal is to maintain inflation at 2% for reasons more complicated than I'll discuss here. If you're interested here is a source you might like: > https://www.goodreads.com/book/show/30231791-the-end-of-alchemy https://www.goodreads.com/book/show/30231791-the-end-of-alch...
      - reedjosh 5y ago
        I understand the goal and all of the justifications of Kaynsian economics. I don't have a misunderstanding of it, but a disagreement with it. See Bitcoin Standard podcast and or book for more on hard money and economics under it. https://saifedean.com/thebitcoinstandard/ https://saifedean.com/thebitcoinstandard/ And or the Mises Institute for the low down on Austrian economic viewpoints that answer many of the questions that Kaynsians can't. https://mises.org/what-austrian-economics https://mises.org/what-austrian-economics And on top of that the fed itself says we've already had 4.2% CPI inflation this year. https://www.bls.gov/cpi/latest-numbers.htm https://www.bls.gov/cpi/latest-numbers.htm But, that's trusting the stakeholders in the inflation game to be honest. If you remove the constant adjustments to the CPI you get a _much_ higher rate of inflation than governments will admit. http://www.shadowstats.com/alternate_data/inflation-charts http://www.shadowstats.com/alternate_data/inflation-charts
      - lowkey 5y ago
        > The Fed's goal is to maintain inflation at 2% for reasons more complicated than I'll discuss here. It would be amazing if you could make the effort to explain the complicated reasons why the Fed's inflationary policy is a good thing. I have yet to hear a sound argument why sound money is worse for the people, than an inflationary currency. I can see how it would benefit the government to hide the true cost of taxation via inflation, but why does it ever benefit the individual to have their wealth diluted by the process of inflation, even if it is "only" by about 2% per year?
        bun_at_work 5y ago
  - lowkey 5y ago
    Where does the Fed get the money to be a lender of last resort - by printing the money and generating inflation? If so, then how does this inflation impact the purchasing power of these last resort dollars? I often like to take things to a logical extreme. Since the Fed can simply print all this money into existence, is there a limit to their ability to print? I mean couldn't they simply print their way out of any economic crisis or would this result in another Weimar republic situation? -- genuine question.
    - tylerhou 5y ago
      Printing money does not always cause inflation. The purpose of the Fed is to keep the dollar's value stable. If demand for the dollar rises, the Fed has to print money to avoid deflation.
      - reedjosh 5y ago
        The fed itself says we've already had 4.2% CPI the last year, and that's trusting the fed not to manipulate it's own metric. https://www.bls.gov/cpi/latest-numbers.htm https://www.bls.gov/cpi/latest-numbers.htm The common mantra "When a measure becomes a target, it ceases to be a measure." applies here too, but many HN peeps seem to think it doesn't for some reason. If you remove the constant adjustments to the CPI you get a _much_ higher rate of inflation than governments will admit. http://www.shadowstats.com/alternate_data/inflation-charts http://www.shadowstats.com/alternate_data/inflation-charts
        tylerhou 5y ago
        > 4.2% CPI the last year, One year ago the dollar was deflating, so this is cherrypicking data. If inflation was above 4% for multiple years then that would be a problem, but a month or two is not anything to be worried about. I'm also not sure why you think adjustments to the CPI should not be allowed. Individual goods get cheaper or more expensive relative to other goods, and consumers change their behavior. It would be asinine to have the government subsidize certain goods (via economic policy) such that all consumers purchase the same basket today as they were in 1990!
bun_at_work 5y ago
Right, because fractional reserves are set around 10% or so. edit: fraction reserve _requirements_ are set around 10% or so.

by jwolfe 5y ago

reedjosh 5y ago

And whenever this comes up, I just like to remind people that we went to a reserve requirement of 0% nearly a year ago with the start of COVID. https://medium.com/navigating-life/we-just-went-from-fractional-reserve-banking-to-zero-reserve-banking-and-its-a-pretty-big-deal-c501432e9be6 https://medium.com/navigating-life/we-just-went-from-fractio... Edit: Downvoted, and I'm guessing it's the source? This is legitimate fact though. Here's the fed's own announcement. > In light of the shift to an ample reserves regime, the Board has reduced reserve requirement ratios to zero percent effective on March 26, the beginning of the next reserve maintenance period. This action eliminates reserve requirements for thousands of depository institutions and will help to support lending to households and businesses. https://www.federalreserve.gov/newsevents/pressreleases/monetary20200315b.htm https://www.federalreserve.gov/newsevents/pressreleases/mone...

tylerhou 5y ago
Which is completely fine, because the Fed is willing to step in as the lender of last resort.
- reedjosh 5y ago
  It may be fine for the faith in banking structures, but it's not that great it you like your dollars to hold value.
  - bun_at_work 5y ago
    This comment betrays your misunderstanding of the financial institutions and systems at play here. The Fed's goal is to maintain inflation at 2% for reasons more complicated than I'll discuss here. If you're interested here is a source you might like: > https://www.goodreads.com/book/show/30231791-the-end-of-alchemy https://www.goodreads.com/book/show/30231791-the-end-of-alch...
    - reedjosh 5y ago
      I understand the goal and all of the justifications of Kaynsian economics. I don't have a misunderstanding of it, but a disagreement with it. See Bitcoin Standard podcast and or book for more on hard money and economics under it. https://saifedean.com/thebitcoinstandard/ https://saifedean.com/thebitcoinstandard/ And or the Mises Institute for the low down on Austrian economic viewpoints that answer many of the questions that Kaynsians can't. https://mises.org/what-austrian-economics https://mises.org/what-austrian-economics And on top of that the fed itself says we've already had 4.2% CPI inflation this year. https://www.bls.gov/cpi/latest-numbers.htm https://www.bls.gov/cpi/latest-numbers.htm But, that's trusting the stakeholders in the inflation game to be honest. If you remove the constant adjustments to the CPI you get a _much_ higher rate of inflation than governments will admit. http://www.shadowstats.com/alternate_data/inflation-charts http://www.shadowstats.com/alternate_data/inflation-charts
    - lowkey 5y ago
      > The Fed's goal is to maintain inflation at 2% for reasons more complicated than I'll discuss here. It would be amazing if you could make the effort to explain the complicated reasons why the Fed's inflationary policy is a good thing. I have yet to hear a sound argument why sound money is worse for the people, than an inflationary currency. I can see how it would benefit the government to hide the true cost of taxation via inflation, but why does it ever benefit the individual to have their wealth diluted by the process of inflation, even if it is "only" by about 2% per year?
      - bun_at_work 5y ago
- lowkey 5y ago
  Where does the Fed get the money to be a lender of last resort - by printing the money and generating inflation? If so, then how does this inflation impact the purchasing power of these last resort dollars? I often like to take things to a logical extreme. Since the Fed can simply print all this money into existence, is there a limit to their ability to print? I mean couldn't they simply print their way out of any economic crisis or would this result in another Weimar republic situation? -- genuine question.
  - tylerhou 5y ago
    Printing money does not always cause inflation. The purpose of the Fed is to keep the dollar's value stable. If demand for the dollar rises, the Fed has to print money to avoid deflation.
    - reedjosh 5y ago
      The fed itself says we've already had 4.2% CPI the last year, and that's trusting the fed not to manipulate it's own metric. https://www.bls.gov/cpi/latest-numbers.htm https://www.bls.gov/cpi/latest-numbers.htm The common mantra "When a measure becomes a target, it ceases to be a measure." applies here too, but many HN peeps seem to think it doesn't for some reason. If you remove the constant adjustments to the CPI you get a _much_ higher rate of inflation than governments will admit. http://www.shadowstats.com/alternate_data/inflation-charts http://www.shadowstats.com/alternate_data/inflation-charts
      - tylerhou 5y ago
        > 4.2% CPI the last year, One year ago the dollar was deflating, so this is cherrypicking data. If inflation was above 4% for multiple years then that would be a problem, but a month or two is not anything to be worried about. I'm also not sure why you think adjustments to the CPI should not be allowed. Individual goods get cheaper or more expensive relative to other goods, and consumers change their behavior. It would be asinine to have the government subsidize certain goods (via economic policy) such that all consumers purchase the same basket today as they were in 1990!

bun_at_work 5y ago

Right, because fractional reserves are set around 10% or so. edit: fraction reserve _requirements_ are set around 10% or so.