Where are national bank accounts actually held?
Banking
Asked by Question Bot03/Jul/20151 answer
1 Answer
F
Faisal Khan
Answered 03/Jul/2015
Understanding how money is created and held by each country, etc. is overly simple, to the extent, we don't believe it.
For the purposes of simplicity...
Think of every country as a child. So there is a person called Greece, Italy, UK, France, US, Kenya, so on and so forth.
Each person (country) has a ledger.
All of these people are sitting in a circle with their ledgers open and facing each other. Having the option to hear and see what is going on.
Now, imagine that the parents of all the European children is called the European Central Bank. The parents give out allowances to each child, and everyone records it. Everyone in the room knows how many Euros, Italy has, how many Greece has and how many France has.
Likewise, the parent of the US child (the Federal Reserve), might give US Dollars to some European, so Greece could have multiple entries in its ledger for Euros and US Dollars.
In some cases like say Philippines, the ledger would have entires for:
Now if Philippines decides to modify its register which is say showing US$ 500 to unilaterally US$ 10,000 - it won't be possible. Why? Because everyone in the room saw (so to speak) what Uncle Sam gave to you. The consensus is that Philippines only has US$ 500.
Philippines cannot print more US Dollars, only the US can. Philippines can however, print as much as Philippines Pesos as it wants. That is its own prerogative.
When a child like Greece spends its money carelessly, ECB's entry for Greece diminishes. Now with no money left, other cousins/siblings come to Greece to ask for their money, and Greece has none to pay back.
All these monetary entries in the EU are essentially entries in the ledgers with the European Central Banks and each country's internal Central Bank keeps a corresponding copy of how much money it has, how much is owed, etc.
Hope that answers your question.
For the purposes of simplicity...
Think of every country as a child. So there is a person called Greece, Italy, UK, France, US, Kenya, so on and so forth.
Each person (country) has a ledger.
All of these people are sitting in a circle with their ledgers open and facing each other. Having the option to hear and see what is going on.
Now, imagine that the parents of all the European children is called the European Central Bank. The parents give out allowances to each child, and everyone records it. Everyone in the room knows how many Euros, Italy has, how many Greece has and how many France has.
Likewise, the parent of the US child (the Federal Reserve), might give US Dollars to some European, so Greece could have multiple entries in its ledger for Euros and US Dollars.
In some cases like say Philippines, the ledger would have entires for:
- Philippines Pesos
- US Dollars (as given by Uncle Sam)
- Euros (as given by Aunty ECB)
- UAE Dirhams as given by Uncle UAE.
Now if Philippines decides to modify its register which is say showing US$ 500 to unilaterally US$ 10,000 - it won't be possible. Why? Because everyone in the room saw (so to speak) what Uncle Sam gave to you. The consensus is that Philippines only has US$ 500.
Philippines cannot print more US Dollars, only the US can. Philippines can however, print as much as Philippines Pesos as it wants. That is its own prerogative.
When a child like Greece spends its money carelessly, ECB's entry for Greece diminishes. Now with no money left, other cousins/siblings come to Greece to ask for their money, and Greece has none to pay back.
All these monetary entries in the EU are essentially entries in the ledgers with the European Central Banks and each country's internal Central Bank keeps a corresponding copy of how much money it has, how much is owed, etc.
Hope that answers your question.
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