2011/02/14 by Charles Goodhart · 1 citation
Economics, Econometrics and Finance · #Banknote #Business #Carry (investment) #Cash #Cash flow forecasting #Convertibility #Currency #Economics #European Monetary and Fiscal Policies #Finance #Financial system #Macroeconomics #Monetary base #Monetary economics #Monetary policy
paper · doi:10.1057/9780230226203.3102
openalex publication_date 2011/02/14 · openalex created_date 2022/05/12 · openalex updated_date 2025/11/06
A key characteristic of bank deposits is that they carry a guarantee of convertibility at sight, or after due notice, into cash. In order to maintain such convertibility, a bank needs to hold reserves of cash. Historically such cash mostly took the form of metallic coin, that is, gold, silver or copper. Nowadays the cash base mostly consists of the liabilities of the Central Bank, primarily notes, but also bankers’ balances at the Central Bank which the bankers can, if they wish, withdraw in note form to add to their own cash holdings. The monetary base, mostly consisting of Central Bank notes in the hands of the public and in the tills of the banks, is so called because it provides the cash base on which the much larger superstructure of convertible deposits is erected.