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Well, banks do not hold cash. Cash is always held by the central bank (that's where the other banks have their accounts). Nowadays, this can easily involve nega
by choeger 5y ago
Well, banks do not hold cash. Cash is always held by the central bank (that's where the other banks have their accounts). Nowadays, this can easily involve negative interest rates. So if a bank now buys some security back from the central bank, they effectively remove money from the system (and get that security in return).
- MuffinFlavored 5y ago> Nowadays, this can easily involve negative interest rates. Source? Does it? I thought negative interest rates were a thing in the EU but not in the US yet?
- jkhdigital 5y agoThe Fed is adamant about preventing negative rates, which is in fact what the reverse repo facility is accomplishing--if market participants could not go to the Fed and had to conduct repo with banks, then the overnight repo rate could easily go negative when there's too much cash sloshing around.