Gold then disappears into cash balance, black market, or exports, when silver flows in from abroad and comes out of cash balances to become the only circulating currency in Ruritania.

Gold then disappears into cash balance, black market, or exports, when silver flows in from abroad and comes out of cash balances to become the only circulating currency in Ruritania.

The depositor holds his money in the form of a deposit and it forms part of his money balances.

So, paradoxically, the drive to deleverage banks and shrink their balance sheets, in the name of making banks safer, destroys money balances.

So, paradoxically, the drive to deleverage banks and to shrink their balance sheets, in the name of making banks safer, destroys money balances.

Simply as follows: with people valuing cash balances more highly, the demand for money increases, and prices fall.

Simultaneously, the person receiving the loan from the bank receives an amount of money which, in turn, becomes part of his cash balances.

Simply as follows: with people valuing cash balances more highly, the demand for money increases, and prices fall.

On the contrary, the bankers receive the money as a loan, as demonstrated by the fact that they, in turn, hand it over to their borrowers, who thus increase their money balances.

This trap occurs when investors seek liquidity in cash and when monetary policy — in terms of cutting interest rates — no longer produces an increase in investment.

This trap occurs when investors seek liquidity in cash and when monetary policy — in terms of cutting interest rates — no longer produces an increase in investment.

Reserve money comprises: (a) currency in circulation (currency outside banks and commercial banks’ cash in vaults); and (b) deposits of commercial banks at the CBM.

The problem is that nominal interest rates cannot go below zero because cash has a nominal interest rate of zero.

The problem is that nominal interest rates cannot go below zero because cash has a nominal interest rate of zero.