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Why isn't there a simple freaking flowchart somewhere.
by isthisthingon99 4y ago
Why isn't there a simple freaking flowchart somewhere.
- danielmarkbruce 4y agoBecause it's so simple it doesn't need one: Bank A sends the central bank a real asset worth $1 million (say, a 10 year government bond). The central bank says "you have a balance with us of $1 million now", and updates their SQL database. "Everyone" agrees the balance with the central bank has real value. Everyone = creditors of the bank, regulators of the bank, accounting standards bodies, auditors, the SEC, trade partners, and probably 10 other groups I can't think of.
- isthisthingon99 4y agoOK but what can they do with this balance
- danielmarkbruce 4y agoSettle payments with other banks is the obvious one - when you send money from Wells Fargo to Chase for example, they settle it behind the scenes by asking the fed to increase Wells balance and decrease Chase's. They can also use it to buy securities from the Fed, to buy securities from other banks, to settle derivatives contracts and margin calls around them.
- isthisthingon99 4y agohow does this make its way into stocks