Re: Non-Banks versus Banks

From: Mark Monson (m_monson_at_ztech.com)
Date: 06/26/04 

Date: Sat, 26 Jun 2004 07:02:57 -0400

"William F Hummel" <wfhummel@comcast.net> wrote in message
news:09tpd01q192icq3agji5jl7860e0sn9fc7@4ax.com...
> On Fri, 25 Jun 2004 23:39:44 -0400, "Mark Monson" <m_monson@ztech.com>
> wrote:
> >
> >OK. I guess I was right the first time: all currency DOES get into circulation by
> >borrowing from the Fed. The bank borrows from the discount window and gets a
> >deposit at the Fed. Then, the bank withdraws cash from its account. We can say
> >the bank isn't directly borrowing cash but it amounts to the same thing. And
since
> >there apparently isn't any other way for cash to get into circulation, we can say
> >that all cash comes into use through borrowing.
>
> Nope. Borrowing implies a promise to return the amount borrowed at
> some future date. A bank makes no such promise when it takes cash
> from the Fed. The fact that the bank pays for the cash with a debit
> against its reserve account should make that clear.

How does a bank get funds into its reserve account at the Fed? What are the terms?

MM

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