Does My Money Actually Move?

[VHG]

General question about money and the movement of it between banks.

Today I had £10,000 in a savings account at a High St bank.

But I asked for it on a cheque, then went to another High St bank and paid the cheque into their savings accounts.

So my question is, does any actually "money" move between these two banks.

So do bank A take £10,000 (the physical money) and give it to bank B.

Or is it all a virtual transaction and no real money actually moves?

So I guess what I am asking is how do all the "High St" banks work when millions of pounds must be moving between them all every day.

And where is my £10,000 (the actual money)?

[Old_Geezer]

I think. They will all have a 'float' of their money available for handing in and out and which they use for customers wanting their cash. They will top it up or 'bank' any excess as they go. The money merely represents your wealth. None is physically earmarked as yours and tracked to reach you as required. I feel that between branches they probably move bulk differences across to the other's vault.

[Maydup]

Other than the money in our pockets, the till's in the banks and shops, all money is virtual.

[Fitzer]

No, no actual money movements will have taken place in the above scenario, your bank will have an account with the other bank and essentially when the second bank deposits your cheque they will simply debit the money from that account

[Old_Geezer]

Ah of course. Cheque not cash. Missed that for some reason. Well there was no real notes or coins then. One doesn't need a float of cheques in the vault.

[Peter Pedant]

No I think it is just a number on a screen

Lehman Bros which went under in 2008 - the London branch had no money in it to pay the fired staff because there was a sweeper thingey which transferred the days takings to NY at 4.59 each night.
I assure you there any were never any lorries outside L ( before it went bankrupt of course )

whereas with Brinksmat ( yet MORE of my neighbours I'm afraid ) in which Kenneth Noye now serving life for murder featured, they learnt that the rules of the game were that the gold bars had to physically moved from place to place..... and lay in wait


AND in Kuwait - when the Iraqis invaded, the British head of the Bank of Kuwait stayed up late (!) and deposited billions of Kuwaiti dinars in various markets which were still open, so that Saddam H had less to seize when he occcupied the building. In fact S declared the Kuwaiti Dinar at parity with the Iraqi, and effectively by doing this just ripped up billions of Kuwaiti Dinar notes.....

[Peter Pedant]

cheques I think ARE bussed around the country.....

[Fitzer]

The actual cheques are indeed moved around to NatWest who performs clearing on UK cheques so in the above scenario the second bank will receive the cheque, credit VHG's account with them and send the cheque to NatWest who will inform the first bank of the debit, bank one will debit VHG's account with them and either credit bank two's account with them or credit their account with bank two who will then mark VHG's account with them as having cleared the cheque and the funds will then be available to VHG.

[alavahalf]

Haven't you ever noticed those people pushing wheelbarrows up and down the High Street . Straining under the heavy loads ... well they are transporting wheelbarrows full of cash between banks.

Only joking .... your cash is not physically moved around in £50 notes.
It is moved about in an electronic transfer when you pay a cheque in.
If banks dealt soley in cash they would all need to have a warehouse to store the notes in ... and loads more staff to handle it.

[factor-fiction]

> As for "And where is my £10,000 (the actual money)?", the banks only hold a small fraction of the money (when I was doing Economics at school they held around 15% but I think it's now around 2%). They hold it either as cash in vaults or deposited with the Bank of England. Consequently, if everyone tried to withdraw all their money at the same time as cash there would be nowhere enough to go round

[Dizmo]

Notes don't mean anything anyway, they are just IOU's. "I promise to pay the bearer on demand". Like FF said, there is far more 'digital' (computerised) money than actual physical money (coins and notes).

[New Judge]

Yes and also bear in mind that because of the clearing system only the balance that is due between banks is moved virtually. If bank A has credits drawn on bank B for £10k and bank B has credits of £15k drawn on bank A only £5k is transferred from B to A. They dont move £15k one way and £10 the other.

[Woetra]

Physical banknotes did not move, just numbers in a database that keeps track of debt.

Your £10k is not 'actual money', because fiat currencies tend not to act as a store value over time, because inflation.

Currency is basically an IOU, or in otherwords debt. When you held the cash in your pocket that was a way of keeping track of the fact that someone owes you £10k worth of useful things, in exchange for all the useful work you have done. When you deposited the IOU's in the bank, that bank could collect the useful things that were previously owed to you, and the bank then owes you £10k. Instead what actually happens is the bank receiving your cash does not spend it, but uses it as collateral to lend ~£950k new cash into existence. The recipients then have a debt to the bank, but they also have a debt of useful things owed to them in exchange for the currency that was magically credited to their Mastercard.

"Your Money" isn't anywhere because it isn't money and it isn't yours since you gave it to the bank. All that moved was debt.