Posted by CJ on 8/13/07 9:39am
Msg #205236

"Banks add cash", what does this mean?

Here is a link to a news story today (Aug 13, 2007).
http://news.yahoo.com/s/ap/20070813/ap_on_bi_st_ma_re/wall_street;_ylt=At4GaPEFfHxGRguRi23Nydys0NUE

It says the banks are adding cash. When I was little, I remember hearing that Nixon was "printing extra money", and this was causing inflation. Is this the same thing? I think it would be better if they lowered interest rates 1/4 point. Then our business would pick up a bit.

I know this is an area I am very ingornant about. I would sure like to read comments from others who understand this better.

Reply by ToniK on 8/13/07 9:58am
Msg #205239

I wish I could help you out. I just heard the eplanation on CNN this morning...ugh it escapes me at the moment

Reply by John_NorCal on 8/13/07 10:04am
Msg #205241

What this usually means is that the Federal Reserve system is lowering the amount of cash that the banks need to keep in reserve thereby adding cash into the lending scenario. The more cash available for lending purposes, the more stability there for interest rates. When the Federal Reserve wants to tighten credit, they require banks to keep more money in reserve thereby taking money out of the lending market.
Capisch?

Reply by cara on 8/13/07 11:38am
Msg #205254

Also, "How does Fed ‘inject’ money into the system?" http://www.msnbc.msn.com/id/20218020/

Reply by John_NorCal on 8/13/07 11:45am
Msg #205256

Cara, see my post above n/m