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> The bank now has $100, and the customer has $0. This is wrong. Edit: I see. I think you’re missing the full accounting picture. When somebody moves $100 of
by junofan 4y ago
> The bank now has $100, and the customer has $0.
This is wrong.
Edit:
I see. I think you’re missing the full accounting picture. When somebody moves $100 of petty cash into a bank, they don’t have $0. They have $100 of cash. The bank has an asset and a liability. Rinse and repeat with the bank and Fed transactions. There’s not an $80 treasury note anywhere because those aren’t MTM.
- kypro 4y agoIt's a simplification, but I agree, it's not fully accurate. I'm guessing what you're getting at here is that bank would technically have a $100 liability with the customer and $100 in cash on its balance sheet. The point I was trying to make is that there's just $100 of spending power in this hypothetical economy.