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Just to make sure we are speaking the same language: If I have $1 in a checking account in a US bank, do I have one dollar, or do I have a dollar-denominated as
by MatteoFrigo 5y ago
Just to make sure we are speaking the same language: If I have $1 in a checking account in a US bank, do I have one dollar, or do I have a dollar-denominated asset of $1 face value, backed by a dollar-denominated liability of the bank?
- ajross 5y agoReserve requirements at US banks are regulated by the US government as one of many mechanisms used to control the money supply. So... yes, sure. It's complicated, but a dollar at a US bank is a "dollar", because that's what "dollar" means. The contention upthread was that foreign banks could do the same thing to print dollars. And, again, it's complicated. They sorta can, but only in the sense of placing a gargantuan short bet on the dollar. (A ton of short selling on a small security can push the price down for the same reason). So no one does that, because no bank wants to play that kind of game (or is allowed: all those large foreign banks are themselves regulated by their own national regimes).
- count 5y agoOh oh, next do the Depository Trust Company and how people don't actually own their stock shares of most public stocks either :)
- lokar 5y agoIf you walk into a US bank and deposit $1 cash, they now owe you $1. To what extent they must have ready cash, fed deposits, liquid assets, illiquid assets, etc to back that debt is the subject of bank regulation