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I think those bills didn't go through decommissioning process for used bills. It's much easier to just keep $1M on passive cash balance forever. Yes, they lose
by deepsun 1y ago
I think those bills didn't go through decommissioning process for used bills.
It's much easier to just keep $1M on passive cash balance forever. Yes, they lose about $5k/month on lost interest rate, but a bank can afford it.
- hgomersall 1y agoThese are bank notes so they are a liability of the fed. Them holding them doesn't mean they have more money, they just have less liability.
- deepsun 1y agoYep. Imagine if they put those banknotes through decommissioning, but didn't actually destroy them. Some day they would put it out (or get it stolen), and now there's unaccounted (counterfeit?) cash in circulation. Better to keep it real.
- necovek 1y ago$5k/month or $60k/year is roughly 6% of annual conformal interest rate — is there any bank that will provide that much return in USA today? (There are investment funds which usually do, but there are no guarantees there)
- deepsun 1y agoI used AFR [1] that are from 4% to 5%. One cannot give loans lower than that. Any mortgage is higher than that. [1] https://www.irs.gov/applicable-federal-rates https://www.irs.gov/applicable-federal-rates