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Under which circumstances, and how, is money ever physically transferred? E.g. with international transfers - unless the netting cancels exactly out, or there i
by 7373737373 5y ago
Under which circumstances, and how, is money ever physically transferred? E.g. with international transfers - unless the netting cancels exactly out, or there is an already funded account at a correspondent/intermediary bank - there has to be cash transported at some point. It'd be understandable if this only ever happened between large, international banks which smaller banks are usually customers of. Other than depositing at the central bank and providing cash withdrawals, does cash ever enter the equation?
- vmception 5y agoThe eventuality of money being transferred is almost all done on credit. The idea that the money can be transferred sometime in the future. During periods of uncertainty and credit/trust dries up, this has been is an area where central banks have been partially stepping in by loosening credit access to spur continued trade and tradelines between financial institutions. This just keeps the credit line going, not settling the money itself. The parties always have the opportunity to try to settle it all.
- thedudeabides5 5y agoYou are conflating 'cash' with 'money' Physical cash is like 2% of what people call money, which usually includes bank deposits. When people STOP accepting bank deposits as money, as in the Euro financial crisis, that's when things get weird. It doesn't get weird because bank X ran out of physical cash, it gets weird because at some point other banks/players stop accepting bank X deposits as money, and then what do you do?
- 7373737373 5y agoI don't, and this doesn't answer my question.
- 3np 5y agoIf you don’t, then why would transportation of cash be needed? The answer is that it isn’t, because cash is a small subset of money. Fiat currency is debt/credit.
- 7373737373 5y agoWhile pure credit as it is originated does not have to be covered by central bank or cash funds, in outgoing transfers it has to be. Banks cannot transfer their own book money.
- 3np 5y agoSo banks will have accounts at the central bank and/or with other banks. Settlement does not require physical transfer of paper cash, in either case. > Banks cannot transfer their own book money. I'm not sure what you mean by this - could you elaborate?
- 7373737373 5y agoWere it not for bank regulation, banks could create unlimited amount of credit, as long as they can cover all net outflows