Where The Money Reside | Unlimited Money Stays

Where the money reside: In the function of society, Bank accounts provide several advantages which carry out as benefits some people. In Malaysia, Bank accounts play a crucial role in the upcoming of Bank account holders since these Bank accounts help them to transact more opportunities or facilities which they can enjoy economical welfare and also invest their money.

Where The Money Reside

Besides that, Bank account holders in Malaysia also could increase their Bank balance by doing online banking activities such as paying bills and transferring money. In addition, Bank account holders will receive SMS or email notification to alert them to the latest updates on their Bank accounts. All of these advantages that Bank account holders can enjoy are because bank provides an efficient system that makes it easier for Bank account holders to manage and monitor their Bank account activities.

Where The Money Reside

In a world where the money reside economies are becoming increasingly globalized, it’s more important than ever to understand the different ways that money moves around. So where does all the money go?

Where The Money Reside

Broadly speaking, there are three main places where money resides: individuals, businesses, and governments. Let’s take a closer look at each of these categories, and where money is generally held within each.

The Bank Account

When someone wants to create a Bank account, they are allowed to list their name as follows:

John Doe Bank of Bankstown. Bank account number 123456789.

This means that John Doe has an account in the Bank of Bankstown with the bank account number 123456789.

That’s where the money resides. The Bank owns the money and is responsible for it.

The Home Bank

In addition to having a Bank account, John Doe may also have a Home Bank. His Home Bank is ABC Corp, which he owes $10,000 on his mortgage. This means that John has a loan from ABC Corp for $10,000 and that Bank of Bankstown (John’s Bank account) owes ABC Corp $10,000.

Home Bank

Home Bank is different from Banks with the following:

1. Home Bank isn’t responsible for what John does with his money. If John goes to the Bank of Bankstown and withdraws all his money, he’ll only owe the Bank of Bankstown for the amount that he withdrew. Bank of Bankstown isn’t responsible for what John does with his money.

2. Bank of Bankstown is responsible if John’s Bank account balance goes to zero (i.e., John has no money in his Bank account). This is because the Bank of Bankstown loaned John the money and they are responsible to get it back. Bank of Bankstown would need to take legal action if John doesn’t repay the loan.

3. Bank of Bankstown is a Commercial Bank. Home Bank is a Financial Institution.

Commercial Banks are in the business of making money by lending money and charging interest on the loans. Financial Institutions are in the business of lending money, but they are not in the business of charging interest for loans.

How Central Bank control Money Supply

Central Bank controls money supply by controlling Bank’s Bank Money Base or Reserve Base. Bank’s Bank is how Commercial Banks create money while Bank’s Bank is how central bank create money. All banks have to maintain a certain reserve. Bank’s Bank is the reserve that all banks have to maintain and the central bank holds the Bank’s Bank.

How Commercial Banks create money:

Commercial Bank create money by lending it out and charging interest on the loan. For example, Bank of Bankstown loaned John Doe $10,000 for a home mortgage at an annual interest rate of 5%. John will need to pay the Bank of Bankstown back $10,500 at the end of the year (5% interest on $10,000 for 1 year). Bank of Bankstown created $500 of money ($10,500 – $10,000) by loaning John Doe money.

Final words

I hope you have enjoyed this article on where money resides. I would be very interested to hear your thoughts in the comments section below.

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