Bank, Bank Transfers

Tiesto

Just trying to figure this out..
If i have an account with bank of Ireland, and i transfer 200 quid from my account to a friends account with some foreign bank, say Deutsche Bank for example..
Ok my account with BOI goes down 200 and my friends account with Deutsche Bank goes up 200..
Yeah thats grand but what gets me is, when does the physical money actually change hands between the 2 banks or how does it work?

Vidic-is-good

Currency is digital these days. If the bank actually wants to hold the cash then it can be printed. If money had to be printed for every single euro or deutch mark then the world would not be as rich as it is. As it is now, money is limitless. Everyone can be rich

stevejazzx

interesting
credits between banks resolved quarterly possibly....

kippy

Interesting topic.....
I was wondering the same with regards cheques.....
But moreso to do with why some banks take so long to clear cheques paid into an account.
When the Cheque clears.....do the banks transfer money and if so how is it "Logged"?


I dont think money is limitless either, nor do I think that everyone can be rich......

Vidic-is-good

kippy wrote:

Interesting topic.....
I was wondering the same with regards cheques.....
But moreso to do with why some banks take so long to clear cheques paid into an account.
When the Cheque clears.....do the banks transfer money and if so how is it "Logged"?


I dont think money is limitless either, nor do I think that everyone can be rich......

Why dont you think that? Considering that you dont have to physically hold your money to know how much your worth. Consider being paid every month and your rent or bills get paid automatically. You didnt see or hold the money, the person receiving the money into their account may not either.

kippy

If money was limitless (which it is not) then what would happen if everyone withdrew all the money they had in savings/investment/current accounts?
Not a discussion I want to get into as it would bring this thread wildly off topic.

Vidic-is-good

kippy wrote:

If money was limitless (which it is not) then what would happen if everyone withdrew all the money they had in savings/investment/current accounts?
Not a discussion I want to get into as it would bring this thread wildly off topic.

Well then why ask the question? ANyway, you missed the point. People dont have to withdraw their money. You are referring to paper money. Money is now digitised. What if all the businesses in the world were to withdraw all their money? Bill Gates would struggle to do that, let alone everyone else. With it all being digitised, we get to use thing slike credit cards.

phantom_lord

kippy wrote:

If money was limitless (which it is not) then what would happen if everyone withdrew all the money they had in savings/investment/current accounts?
Not a discussion I want to get into as it would bring this thread wildly off topic.

If every tried to get out of the markets they'd collapse...as for the saving there wouldn't be enough money in paper for it to be taken out. And banks would have to recall all their loans as they wouldn't have the reserves to lend the money, they can lend out 10 times what they have in reserves, i think?

Anyway at the end of the day money doesn't really exist/have value whether it's paper or on a computer...

Read some of this guys articles http://www.gold-eagle.com/research/heinndx.html

phantom_lord

And cash is limitless...before the euro the central could have printed as much money as it wanted...it just would have been valueless, like how the mark became valueless after ww1

kippy

I am still not with ye here.
If money is so digital and limitless why does it take 3 to 5 days to either transfer cash from one bank to another-or three to five days to for a cheque to clear.......
Money is not limitless....as phanton has pointed out...if it were it would have no value.....there is a limit on how much can be printed......even digital money as you point out has to have a limit. It has to be earned in some way. It cannot just be created because someone wants to create it-although I believe governments control what is created and moved around.......it has to have a value.....

drdre

very interesting topic.i would love to find out more.also you should put this topic in the biz section as you might get better answers there

kippy

Good idea drdre....post reported for move to biz....

Ruu_Old

Yep you will find more answers from the money heads, in Biz->Investment/Markets/Money

Tiesto

im most certainly no professional in this topic, but i do not believe at all that cash is limitless. I dunno if the central bank could produce as much as it wanted before the monetary union, but if it printed that much, it would mess up the whole economy. As money supply goes up, inflation goes up too..

In the Euro area its the governing council (a part of the Eurosystem) which decides reserve requirements.. whether more cash needs to be produced... The ECB puts a certain amount of liquidity or cash up for sale. Banks bid the amount they want at successive interest rates. National central banks then collect bids from its commercial banks and then passes the info onto the ECB.
The ECB then decides which proportion of bids will be accepted and instructs the NCB's accordingly. Highest bidder wins. Its just like an auction..

This is what kinda got me thinking about bank, bank transfers. But in this case, im guessing its like a term loan, and the commercial banks gotta pay the ECB back with interest through their NCB...

Vidic-is-good

Regardless of inflation or 'money being earned', it is still limitless. If it isnt then there has to be a limit. The amount distributed now? Nope, that would mean for me to get richer, someone has to get poorer. It would also mean that the world today would be as rich as it was 100 years or so ago. Cash doesnt have a limit. it is just people limiting themselves. With money being digital, what could we possibly run out of? Tomorrow monring the banks could declare everyone to be billionaires. Not going to happen but not impossible.

dermot_sheehan

Vidic-is-good wrote:

Regardless of inflation or 'money being earned', it is still limitless. If it isnt then there has to be a limit. The amount distributed now? Nope, that would mean for me to get richer, someone has to get poorer. It would also mean that the world today would be as rich as it was 100 years or so ago. Cash doesnt have a limit. it is just people limiting themselves. With money being digital, what could we possibly run out of? Tomorrow monring the banks could declare everyone to be billionaires. Not going to happen but not impossible.

The limit is basically the amount of goods and services that can be purchased with currency. Remember the euro in your pocket is just a unit of account, increase the number of them without increasing the amount of things you can exchange them for, and their value goes down (inflation).


The eurosystem decides how much money is in the economy (called the M1 money supply, basically money on demand like current accounts and currency in circulation) by controlling interest rates and commerical banks reserve requirements (ratio between a banks reserves and how much it can loan). If they decrease rates, banks can loan more money "increasing" the amount of money in circulation. If they increase rates, people save more, taking money out of the economy. The government also can control this by fiscal policy by running a surplus or a deficit.


to return to the original question, when you transfer money to a bank in germany, your account is debited 200euro, aib's account with the central bank is then debited 200 euro. Central banks account with ecb is debited 200. Bundesbank's account is credited 200, German commercial banks account is credited 200. The total amount of euros in circulation has stayed the same. For a domestic cheque, its simply one banks account with the central bank is debited, the other is credited. Why this takes 5 days is beyond me (banks have interest free use of that money during that time)

kippy

gabhain7,
Thanks for the explaination of the delay in processing money and indeed how it is done internationally.
It would be interesting to know why the delay is needed between lodging a cheque and it actually "clearing" hopefully someone can clear it up.