FED Extra Cash - $50 Billion, $50 Schmillion, How About "Well Above" $200 Billion

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http://www.boston.com/dailyglobe2/347/business/Fed_cash_reserve_bigger_than_planned+.shtml

There are $175B in little pieces of paper in circulation.

They normally have $150B sitting at the FED for operations and reserve.

They were going to print an additional $50B to throw in the system for liquidity.

They also printed $150B of the new 20s without withdrawing the old ones.

Now they have "well above" $200 billion. (Thats $150B + $50B + whatever of the $150B in the new 20s they havn't put in circulation.)

Wow. I think they have enough little pieces of paper to put in the ATMs.

-- ng (cantrpovideemail@none.com), December 14, 1999

Answers

Sure, as long as everyone doesn't start to worry at the last minute and try and withdraw... oops.

-- Servant (public_service@yahoo.com), December 14, 1999.

To put this into perspective . . . U.S. bank's have deposit liabilities (i.e., money that bank's owe to depositors) of approximately 3.7 trillion. If they have $200 billion in reserve, then can cover 5.4 percent of the total. In other words, if everyone decided to cash out of the system at the same time, banks could pay $.054 cents on the dollar. To put it another way, if everyone had the same amount on deposit (which they obviously don't) only 5.4 percent of them would get their money out. The others would be sent packing. Welcome to the world of fractional reserve banking.

-- Michael S. Hyatt (mhyatt@michaelhyatt.com), December 14, 1999.

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