Does the US keep trillions in cash in a bank?
In: Economics
On a digital a/o physical ledger somewhere. Money has no value if it’s not tied to treasuries and deposits. It’s just a thread and cotton sheet with good art-design.
Paper money and digital currency are essentially physical proof of the “riches” of the person or entity that gave it away. It’s like a diploma that says you graduated from an 8-year Master’s degree on Physics. The diploma itself is useless without the education that you went through to get an equivalent/proof of completion.
Hopefully it makes a little bit more sense.
No, the government increases and decreases money supply using the Fed. It can buy treasuries, which puts money into the system. It can decrease bank reserve requirements, which increases money availability banks can use to loan out. Also Lowering rates makes it cheaper to borrow.
It should be noted, it’s not physical money.
The US needs to keep track of some physical assets. Paper currency is managed by the 12 member banks of the Federal Reserve. Coins are managed by the mints in Denver and Philadelphia. Gold is famously managed by Fort Knox.
But most of the money (physical or not) that the government lays hands on passes straight through to some other use. Even though the government SPENDS a lot of money, it rarely holds much. Your taxes immediately get turned into food stamps/military helicopters/interest payments on bonds, etc. In finance, it’s wasteful to just let money sit around, and the Treasury Department knows this too.
Yes. The government’s bank is the Federal Reserve, which is also a part of the government. When the Treasury spends money, it writes and check like any other business. The receiving bank then settles the check with the Federal Reserve Bank to transfer the funds. Interestingly, that bank might also have an account with the Federal Reserve the various legal and logistical reasons.
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