What does it mean to trade a balance?
Posted: Tue Apr 15, 2008 6:19 am
I have asked this in several places, and no one has even attempted an answer. This is a question that arose while I was reading about the Federal Reserve System. To me, a balance is a number, not a commodity in a transaction. What does this sentence from the Fed's own document mean?
"The Federal Reserve implements monetary policy through its control over the federal funds rate-the rate at which depository institutions trade balances at the Federal Reserve."
http://www.federalreserve.gov/pf/pf.htm
What does it mean to "trade balances"? I can speculate, but I'm trying to ascertain the starting point of what money is - in the current sense. The best I can gather is that money consists of balances, and that balances are amounts of money.
"The Federal Reserve implements monetary policy through its control over the federal funds rate-the rate at which depository institutions trade balances at the Federal Reserve."
http://www.federalreserve.gov/pf/pf.htm
What does it mean to "trade balances"? I can speculate, but I'm trying to ascertain the starting point of what money is - in the current sense. The best I can gather is that money consists of balances, and that balances are amounts of money.