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> Rich people do not hoard cash. They invest it, all of it. Did I not make that clear? I said that they "don’t appreciably change their expenditures except of

by User23 3y ago

> Rich people do not hoard cash. They invest it, all of it. Did I not make that clear? I said that they "don’t appreciably change their expenditures except of course on finance (sic) assets, which observably have inflated like crazy." I dislike the lazy and misleading usage of "investing" for a simple asset swap of cash for already issued financial assets, even though that's what most people mean by the term. That is a savings reallocation. Investing is when you actually allocate new capital, so for example buying into an IPO, a public offering, angel investing, buying equipment, and so on. > Rich people do not hoard cash. They invest it, all of it. Even money deposited in a bank account gets invested, as the bank loans it out. Banks don't loan deposits, but rather loan origination creates deposits. You're a very smart guy, take some time to learn how the banking system actually works. > There are no Scrooge McDuck cash vaults. The Federal Reserve Bank of New York has entered the chat.[1] [1] https://www.newyorkfed.org/aboutthefed/goldvault.html https://www.newyorkfed.org/aboutthefed/goldvault.html

WalterBright 3y ago
>> Rich people do not hoard cash. They invest it, all of it. > Did I not make that clear? You wrote: "ultra high net worth persons who mostly hoard it" > Banks don't loan deposits, but rather loan origination creates deposits. You're a very smart guy, take some time to learn how the banking system actually works. The banks cannot loan money out unless they have reserves on deposit. Yes I know about fractional reserve banking, but those reserves come from deposits. That's why banks give out free checking. They can loan a multiple out of the cash on deposit. It's also why they have minimum deposit levels. Take some time yourself :-) "No individuals or private sector entities are permitted to store gold in the vault." -- from your cite
- User23 3y ago
  > You wrote: "ultra high net worth persons who mostly hoard it" I thought it was clear that the sentence after modified that. Although you need to ask yourself, when those UHNWIs spend a billion dollars cash on stocks and bonds, where does that cash go? It doesn't just disappear into the ether, it becomes the seller's deposit, and now the seller is holding the cash. So yeah, at the end of the day (literally, payments settle at the end of the day), somebody is holding that cash, and that somebody is the ultra rich and banking institutions, trusts, and various other entities that they own, with public pension funds taking up some of the slack. It's much clearer if you stop think of it as "investing" and start think of it as what it is, an asset swap. Namely swapping cash for equity or debt. > The banks cannot loan money out unless they have reserves on deposit. Yes I know about fractional reserve banking, but those reserves come from deposits. That's why banks give out free checking. They can loan a multiple out of the cash on deposit. It's also why they have minimum deposit levels. Nope. Reserves come from the Federal Reserve, they're a different thing. That's right, the money in your deposit account and the money banks use for interbank payments are different "data types" that happen to share the same unit of account. Banks can and do originate loans in any amount they deem fit when they have a creditworthy borrower. When Mr Banker is deciding whether or not to extend your business a 10 million dollar line of credit, he doesn't call Fred down in the Vault Department to check if there is enough in the money bin or reserve account to originate the loan. He simply sends it off to underwriting, sees if they think your business is creditworthy, and if so originates the loan, which creates a loan liability and a deposit asset on the business's ledger and a loan asset and deposit liability on the bank's ledger. Reserves are not at all involved in the loan origination process. Then before close of business the bank acquires any necessary reserves on the interbank market or from the discount window. And those reserves will always, in aggregate, be available, because the 0th law of the Federal Reserve is "thou shalt maintain the integrity of the interbank payment system."[1] The fact that reserves have no direct effect on loan origination is precisely why banks are now required to meet capital requirements in addition to reserve "requirements." > Take some time yourself :-) I have. Like I said, you're objectively wrong about this. If you're ok with that state of affairs then fine, but since this site is about knowledge and I have great respect for you I thought I'd share. > "No individuals or private sector entities are permitted to store gold in the vault." -- from your cite That was mostly humorous. But yeah, money bins are for the elite. Sovereign wealth funds and such. Incidentally this is true for reserves as well. Individuals are not permitted to open a reserve account at a Federal Reserve Bank. The only way we can actually obtain and hold reserves is via physical Federal Reserve Notes. Obviously that's got a lot of considerable drawbacks, although I'd bet dollars to donuts that the ultra wealthy probably keep somewhere between a hundred thousand and a million bucks in paper money reasonably close at hand for reasons analogous to why normal people have a change jar.
  - WalterBright 3y ago
    The money is always put to use, one way or another. It is not hoarded, because it's stupid to hoard large quantities of money. You don't get wealthy by being stupid with money. > Reserves come from the Federal Reserve Sigh. Remember that Silicon Valley Bank that went bust recently because it didn't have enough on deposit to cover customer redemptions? > I'd bet dollars to donuts that the ultra wealthy probably keep somewhere between a hundred thousand and a million bucks in paper money reasonably close at hand You'd lose that bet. There's simply no reason to do that other than if you're doing illegal money laundering. > Banks can and do originate loans in any amount they deem fit when they have a creditworthy borrower. No, they have to meet the reserve ratio. Otherwise, they wouldn't offer free checking.
    - User23 3y ago
      > The money is always put to use, one way or another. It is not hoarded, because it's stupid to hoard large quantities of money. You don't get wealthy by being stupid with money. To highlight your ignorance let’s avoid distractions and focus on this one point: if the filthy rich don’t have most of the cash, who does? Who has 31 trillion dollars in cash, and isn’t filthy rich? Remember that cash always exists. If Mr Filthy spends a billion to buy stock from Mr Rich, now Mr Rich holds that billion in cash. That cash billion is always going to be in play. What chain of accounting operations do you imagine take place that allow the UHNWI sector to divest itself of cash nearly entirely and who is going to hold that cash once they have? > You'd lose that bet. There's simply no reason to do that other than if you're doing illegal money laundering. In my personal experience, which is to say the VHNWIs I’ve known (owns property outright in Tokyo, Hamptons, NYC central park overlook, bentley, that kind of guy) it’s been for drugs. An awful lot of blow mainly. I’ve never to my knowledge met an UHNWI so sure I’m extrapolating, but I’m pretty sure the kind of oil sheikh who flies around his arabian stallions and camel herd with him on his private 747 has a mil or two cash handy for whatever.
      - WalterBright 3y ago
        > if the filthy rich don’t have most of the cash, who does? Who has 31 trillion dollars in cash, and isn’t filthy rich? It's 2 trillion, not 31. https://www.uscurrency.gov/life-cycle/data/circulation https://www.uscurrency.gov/life-cycle/data/circulation As to who has it, it's in circulation. It's being used to buy goods and services, and then the merchant does nightly drops to the bank, who credits it to the merchant's account, then hands out the cash for withdrawals and loans. I would presume that much of the cash in circulation is in the untracked illegal economy, as the cash isn't traceable. Drug dealers hoard millions in cash because no bank will take it. > If Mr Filthy spends a billion to buy stock from Mr Rich, now Mr Rich holds that billion in cash. Using emotionally laden words doesn't make your case more compelling. Be that as it may, nobody buys stock anymore with cash. I've been buying stock my entire adult life, never with cash. > it’s been for drugs I.e. the black market, which I already allowed runs on cash. > I’m pretty sure the kind of oil sheikh who flies around his arabian stallions and camel herd with him on his private 747 has a mil or two cash handy for whatever. Speculation. But indeed, some rich people may have large quantities of cash on hand for use in the black market. After all, an illegal arms dealer isn't going to take your credit card. But that's not hoarding cash, either.

by User23 3y ago

WalterBright 3y ago

>> Rich people do not hoard cash. They invest it, all of it. > Did I not make that clear? You wrote: "ultra high net worth persons who mostly hoard it" > Banks don't loan deposits, but rather loan origination creates deposits. You're a very smart guy, take some time to learn how the banking system actually works. The banks cannot loan money out unless they have reserves on deposit. Yes I know about fractional reserve banking, but those reserves come from deposits. That's why banks give out free checking. They can loan a multiple out of the cash on deposit. It's also why they have minimum deposit levels. Take some time yourself :-) "No individuals or private sector entities are permitted to store gold in the vault." -- from your cite

User23 3y ago
> You wrote: "ultra high net worth persons who mostly hoard it" I thought it was clear that the sentence after modified that. Although you need to ask yourself, when those UHNWIs spend a billion dollars cash on stocks and bonds, where does that cash go? It doesn't just disappear into the ether, it becomes the seller's deposit, and now the seller is holding the cash. So yeah, at the end of the day (literally, payments settle at the end of the day), somebody is holding that cash, and that somebody is the ultra rich and banking institutions, trusts, and various other entities that they own, with public pension funds taking up some of the slack. It's much clearer if you stop think of it as "investing" and start think of it as what it is, an asset swap. Namely swapping cash for equity or debt. > The banks cannot loan money out unless they have reserves on deposit. Yes I know about fractional reserve banking, but those reserves come from deposits. That's why banks give out free checking. They can loan a multiple out of the cash on deposit. It's also why they have minimum deposit levels. Nope. Reserves come from the Federal Reserve, they're a different thing. That's right, the money in your deposit account and the money banks use for interbank payments are different "data types" that happen to share the same unit of account. Banks can and do originate loans in any amount they deem fit when they have a creditworthy borrower. When Mr Banker is deciding whether or not to extend your business a 10 million dollar line of credit, he doesn't call Fred down in the Vault Department to check if there is enough in the money bin or reserve account to originate the loan. He simply sends it off to underwriting, sees if they think your business is creditworthy, and if so originates the loan, which creates a loan liability and a deposit asset on the business's ledger and a loan asset and deposit liability on the bank's ledger. Reserves are not at all involved in the loan origination process. Then before close of business the bank acquires any necessary reserves on the interbank market or from the discount window. And those reserves will always, in aggregate, be available, because the 0th law of the Federal Reserve is "thou shalt maintain the integrity of the interbank payment system."[1] The fact that reserves have no direct effect on loan origination is precisely why banks are now required to meet capital requirements in addition to reserve "requirements." > Take some time yourself :-) I have. Like I said, you're objectively wrong about this. If you're ok with that state of affairs then fine, but since this site is about knowledge and I have great respect for you I thought I'd share. > "No individuals or private sector entities are permitted to store gold in the vault." -- from your cite That was mostly humorous. But yeah, money bins are for the elite. Sovereign wealth funds and such. Incidentally this is true for reserves as well. Individuals are not permitted to open a reserve account at a Federal Reserve Bank. The only way we can actually obtain and hold reserves is via physical Federal Reserve Notes. Obviously that's got a lot of considerable drawbacks, although I'd bet dollars to donuts that the ultra wealthy probably keep somewhere between a hundred thousand and a million bucks in paper money reasonably close at hand for reasons analogous to why normal people have a change jar.
- WalterBright 3y ago
  The money is always put to use, one way or another. It is not hoarded, because it's stupid to hoard large quantities of money. You don't get wealthy by being stupid with money. > Reserves come from the Federal Reserve Sigh. Remember that Silicon Valley Bank that went bust recently because it didn't have enough on deposit to cover customer redemptions? > I'd bet dollars to donuts that the ultra wealthy probably keep somewhere between a hundred thousand and a million bucks in paper money reasonably close at hand You'd lose that bet. There's simply no reason to do that other than if you're doing illegal money laundering. > Banks can and do originate loans in any amount they deem fit when they have a creditworthy borrower. No, they have to meet the reserve ratio. Otherwise, they wouldn't offer free checking.
  - User23 3y ago
    > The money is always put to use, one way or another. It is not hoarded, because it's stupid to hoard large quantities of money. You don't get wealthy by being stupid with money. To highlight your ignorance let’s avoid distractions and focus on this one point: if the filthy rich don’t have most of the cash, who does? Who has 31 trillion dollars in cash, and isn’t filthy rich? Remember that cash always exists. If Mr Filthy spends a billion to buy stock from Mr Rich, now Mr Rich holds that billion in cash. That cash billion is always going to be in play. What chain of accounting operations do you imagine take place that allow the UHNWI sector to divest itself of cash nearly entirely and who is going to hold that cash once they have? > You'd lose that bet. There's simply no reason to do that other than if you're doing illegal money laundering. In my personal experience, which is to say the VHNWIs I’ve known (owns property outright in Tokyo, Hamptons, NYC central park overlook, bentley, that kind of guy) it’s been for drugs. An awful lot of blow mainly. I’ve never to my knowledge met an UHNWI so sure I’m extrapolating, but I’m pretty sure the kind of oil sheikh who flies around his arabian stallions and camel herd with him on his private 747 has a mil or two cash handy for whatever.
    - WalterBright 3y ago
      > if the filthy rich don’t have most of the cash, who does? Who has 31 trillion dollars in cash, and isn’t filthy rich? It's 2 trillion, not 31. https://www.uscurrency.gov/life-cycle/data/circulation https://www.uscurrency.gov/life-cycle/data/circulation As to who has it, it's in circulation. It's being used to buy goods and services, and then the merchant does nightly drops to the bank, who credits it to the merchant's account, then hands out the cash for withdrawals and loans. I would presume that much of the cash in circulation is in the untracked illegal economy, as the cash isn't traceable. Drug dealers hoard millions in cash because no bank will take it. > If Mr Filthy spends a billion to buy stock from Mr Rich, now Mr Rich holds that billion in cash. Using emotionally laden words doesn't make your case more compelling. Be that as it may, nobody buys stock anymore with cash. I've been buying stock my entire adult life, never with cash. > it’s been for drugs I.e. the black market, which I already allowed runs on cash. > I’m pretty sure the kind of oil sheikh who flies around his arabian stallions and camel herd with him on his private 747 has a mil or two cash handy for whatever. Speculation. But indeed, some rich people may have large quantities of cash on hand for use in the black market. After all, an illegal arms dealer isn't going to take your credit card. But that's not hoarding cash, either.