I go to various banks and trade in the level 2 for level 1.
I take my billions of level 1,and stick it in a warehouse.
Maybe one day I even set it on fire.
What does this mean? Does the fed recognizes the loss, and just print more? Have I in effect just shrunk the economy? My level 2 money is still in the system, its just the paper has vanished.
By extension, say every person loses one $10 bill every year, in an unrecoverable (by anyone) way. Presumably that's factored into the money supply?
Is changing the paper (as in the UK this year) a way of "cleaning the balance sheet" - effectively preventing some truly monster hoard from suddenly appearing?
I go to various banks and trade in the level 2 for level 1.
I take my billions of level 1,and stick it in a warehouse. Maybe one day I even set it on fire.
What does this mean? Does the fed recognizes the loss, and just print more? Have I in effect just shrunk the economy? My level 2 money is still in the system, its just the paper has vanished.
By extension, say every person loses one $10 bill every year, in an unrecoverable (by anyone) way. Presumably that's factored into the money supply?
Is changing the paper (as in the UK this year) a way of "cleaning the balance sheet" - effectively preventing some truly monster hoard from suddenly appearing?
So many questions...