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The point here is that a particular bank cannot be sure where any disbursed loan funds may end up and can only count on a small proportion returning.This means that they simply inflate their balance sheet by making loans and counting on the funds to come back as deposits.Again it is also easier to deliver electronic funds versus physical cash!!The next question – how many people pay for items via electronic payment systems versus physical cash?That may well be a standard (and useful) measure for economic policy questions.However, to me, the total amount of funds in an economy does not include bank deposits (whether chequing or otherwise) but does include total liquid funds (cash, government bonds etc.) held by the banks – a much smaller figure.

The answer really is heavily weighted towards to former – as it takes less time to negotiated the settlement of the funds via electronic payment systems than it does to price and settle a government bond (which is “generally” traded as trade date plus a few days).Cash dealers for financial insitutions, in many parts of the world, can transact within a 15 second (or less) time slot, providing liquidity to transactions that assist in providing markets with almost endless liquidity if required.Central banks insist on this liquidity to ensure a solid platform for economic stability.This is a contractual question between me and the bank.Most of the time the bank will honour the demand to pay the funds, so under most circumstances the funds in my bank account are a close cash substitute and can therefore be regarded as money, and I agree with Mark above on that.

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