They are the monetary construct we must understand to interpret the difference between wholesale money and retail money. Wholesale money (Fed reserves) is money that banks use, and retail money (Fed notes) is money that people use. Fed reserves are deposits for banks only and do not have any retail access: no individual can spontaneously open up an account at their local Federal Reserve branch and acquire them. The difference between wholesale and retail money becomes more important when discussing the future of central banking, but in the historical context, the Fed’s mandate was to provide wholesale money, or money for the banking system, when the instability of credit stoked financial unrest. The name said it all; the Federal Reserve system was intended primarily to be a wholesale rescue mechanism of reserves.
Dear @zuerich, Thank you for article!
I felt the need to understand the concepts of wholesale money (Fed reserves) and retail money (Fed notes) first.
I wonder in what way the US monetary structure can change socialist Europe and communist China in the future!