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Aren't savings required to support loans -- business, home, etc? Does that imply saved money actually is doing something?
by cloverich 5y ago
Aren't savings required to support loans -- business, home, etc? Does that imply saved money actually is doing something?
- netcan 5y agoNo, strictly. EG, the ECB recently "loaned" EU member states quite a lot of euros. They do this every year, with the amount determined by public deficits. The amount is not determined by the amount of savings in ECB savings accounts. They can loan as much as they need, subject to EU law. Public surpluses (deposits by EU member states into their national ECB savings account) are not common. The public doesn't make up the difference. There's no auction of ECB bonds before budget season to balance savings and loans. Banks access funds in a similar way, though the EU chain is more complex that the UK or US'. There are often rules that dictate a balance between savings and access to central bank funds. Basically though, banks can loan as much as their regulators allow them to... for the same reason that states can.