Log In
Register
Home
Topic RSS
Facebook
Twitter
Email this5:08 am
I admit it, I have almost no understanding of banking, finance and economics. But I also have a lingering doubt that I am being scammed. Common sense suggests to me that something is not right. OK, straight up, I relate to the Bedouins who in the film 'Lawrence of Arabia' were livid when they broke open a chest and fund paper not gold. I like to see an feel money, in whatever form, not rely on digits in a computer.
So, here is my question that you money whizzes can contemplate...
Have you noticed a significant change in the last 30 years with regard to attitudes and practices of currency?
I was issued an out-of-province postal money order and I had to go to seven PO's before one had enough cash and at that one I had to almost threaten to get it. They all wanted to issue me a cheque. I explained that the whole idea of PMOs is to not have to even use the banking system.
I don't get it. If the Federal government of Canada, like the US one (albeit less so no?) is creating currency out of thin air by the printing presses, why is there so little of it around? And what is this fear of currency in the market place?
9:24 am
hermes said:
Have you noticed a significant change in the last 30 years with regard to attitudes and practices of currency?
I was issued an out-of-province postal money order and I had to go to seven PO's before one had enough cash and at that one I had to almost threaten to get it. They all wanted to issue me a cheque. I explained that the whole idea of PMOs is to not have to even use the banking system.
I don't get it. If the Federal government of Canada, like the US one (albeit less so no?) is creating currency out of thin air by the printing presses, why is there so little of it around? And what is this fear of currency in the market place?
Bank notes are a scarce commodity and represent only a small fraction of the money in circulation because most of the things that the average person knows as money, is actually credit created by the commercial banks. The Bank of Canada controls the Monetary Base which includes bank notes and commercial bank reserves held at the Bank of Canada. M0 represents the number of bank notes that have not been deposited at a commercial bank and M1, M2, and M3 represent money as a form of credit once M0 gets deposited at the commercial banks.
In your scenario, you were trying to trade credit for bank notes. The amount of credit created as a result of bank notes deposited at commercial banks is far greater than the number of bank notes available. Since most people exchange credit rather than actual bank notes, most institutions don't keep very many bank notes around unless by special request arranged ahead of time. Bank notes require physical transportation, whereas credit amounts are transferred by an accounting exercise.
You can find more information at the Bank of Canada's website: http://www.bankofcanada.ca/abo.....ey-supply/ or read a summary on Wikipedia: http://en.wikipedia.org/wiki/B....._of_Canada
Wikipedia had the following to say, which is very relevant in our current situation:
The money supply was contracting and deflation was common, as the economy corrected from the high inflation in the 1920s. The government claimed it was constrained by its foreign debts, and it would be less costly to borrow money if it could be repaid in debased currency.
and here is the part that talks about the difference between Bank of Canada money and commercial bank money:
It is important to distinguish between the right to "issue money", which is the sole right of the Bank of Canada, and the ability to "create money", which, through legislation and regulation enacted by Parliament, is largely done by commercial banks through the taking of deposits and the issuance of loans. Presently, the Bank of Canada "issues" less than 5% of Canada's money; more than 95% of Canada's money is "created" by commercial banks, bearing interest, through the process of fractional-reserve banking.
1:22 pm
March 25, 2009
Offline
Try getting a bank to give you a lot of cash, say $10k. Usually they make it quite inconvenient and you have to wait days. I would hate to see a bank run if they don't have $50k in the vault!
I prefer to use cash in all my transactions. It is too easy to overspend with digital money (debt cards) but give up a fist of $20s and you think about things first...
Have a great day
6:53 pm
December 12, 2009
Offline
mike,
You have to remember each branch has a strict cash limit that must be adhered to, which includes any foreign currency cash holdings. As well, typically, the branch's ATMs make up at least half that branch cash limit. Foreign currency cash holdings typically range from 10-30% of the branch's cash limit. For the remainder of what's left, that has to be split among all denominations of notes. Further, the branch has to ration its cash among all its customers and, especially in smaller suburban branches where limits would typically be smaller, can't just provide you with $15,000 or $20,000 on a whim. However, if you order cash a week before (since branches can typically order their cash supply only once per week), you can be accommodated and there would generally be no fee.
The bank will always offer to supply you with a bank draft or travellers' cheques (in the case of foreign currencies) at no charge in lieu of cash.
Besides, why do people insist on cash anyway? You're just going to inconvenience yourself when you take it to another bank - or inconvenience the party you are paying when they take it to their bank - as a large cash and/or unusual transaction report would/may be required to be filed with FINTRAC - which shares the data it collects with national security, law enforcement and tax collection agencies.
Cheers,
Doug
11:37 am
Yes, why would you want large sums of cash unless you're up to no good? You eat the risk of possibly having counterfeit bills in there, not to mention getting robbed. It's not worth saving the few bucks it will cost to get a bank draft, which is typically cheaper than certifying a cheque. But then again there's the weird paranoid personalities out there who insist on using untraceable cash lest the government know what they had for lunch....
2:45 pm
December 12, 2009
Offline
Jim said:
Yes, why would you want large sums of cash unless you're up to no good? You eat the risk of possibly having counterfeit bills in there, not to mention getting robbed. It's not worth saving the few bucks it will cost to get a bank draft, which is typically cheaper than certifying a cheque. But then again there's the weird paranoid personalities out there who insist on using untraceable cash lest the government know what they had for lunch....
Thanks Jim for validating my points. However, it's worth pointing out that most banks, and I dare say all banks, will provide you with a bank draft free of charge when they are unable or unwilling to provide you with large sums of cash. So, the argument to "save a few bucks" on the cost of a bank draft doesn't hold water anymore. 🙂
Cheers,
Doug
3:49 am
March 25, 2009
Offline
Jim said:
Yes, why would you want large sums of cash unless you're up to no good?
Call me old fashioned, but maybe it's just because I like having cash in hand vs digital cash? Nothing wrong with using paper money is there?
Doug: My point was if banks only hold a small portion of cash on hand and depositers demanded real cash, what would the bank do?
Have a great day
11:56 am
December 12, 2009
Offline
Your funds are safe, mike, rest assured. If you demanded real cash, that's fine, but you can't have -- and shouldn't expect to have -- it the same day. It can be ordered for you as part of next week's cash order. Alternatively, you can withdraw some cash at one branch and then withdraw some at another. You may even be able to take a bank draft to another bank you deal with and withdraw even more cash there. It's a little more work for you, but if you really want the cash, you'll do it. 
Bank branches still do keep quite a bit of cash on hand. I have heard that at least one of the Big Five bank branches in a suburban area keeps between $200,000 and $300,000 on hand at any given time. In mid-sized cities, branches typically would keep between $300,000 and $600,000 and in large, urban cities, major "flagship branches" would typically keep over $1 million on hand. However, as I said, these cash limits are for the branch and include stocking the ATM(s) which typically would use up at least half your branch cash limit. There are also foreign currency cash holdings that take up another 10-30% of the branch cash limit, depending on the size of the branch, its proximity to other branches within the same geographic region and its clientele.
Cheers,
Doug
Please write your comments in the forum.