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Robbing banks and inflation

Q

Qacer

Platinum Member
Lately, I've been hearing a lot of bank robbery happening in Tampa. A few days ago two banks got hit. Today another bank got robbed. It seems like the past few months I've heard of more bank robberies than I have in the last 5 years.

So I was thinking of some messed up anime skit, and then this question popped up. If a country has a high inflation rate, would a coordinated nationwide robbery help it go down? That's assuming that the robbery was a plan to take money out of the banks and just burning them.

In a way, I see it as decreasing the bank's money supply, so with lesser money in circulation the inflation rate should be down. Right?

I'm not an economist, but I was just curious.
 
well, the money only goes out of circulation if they burn it or bury it. i think the idea is to steal the money and put it back into circulation.
 
Hmm.. if it really does affect inflation, then that would make an interesting Mission Impossible plot. One country has a lot of money for borrowing, so interest rates are low.

Antagonist borrows money at low interest rates. Then sets up to rob lots of money from the major banks. The money is then burned to erase any evidence. Money supply decreases and interest rates go up. Antagonist then legally lends money for a higher interest rate. It is Tom Cruise's mission to lay the smack down.
 
I decided to email the Federal Reserve to see if they can answer my question:

"Hi there! Recently, I've enjoyed reading introductory articles regarding the economy from currency, interest rates, etc. I was reading an article about the relationship of interest rates, the monetary supply, and inflation. I am curious. In a what-if scenario, if a huge supply of money suddenly disappears (fire, acts of God, etc.), well that decrease the monetary inflation of a country? Thanks!
Click to expand...

I got the following reply:

"Thank you for your recent correspondence to the Federal Reserve Board.

I regret but I am unable to answer hypothetical questions. Answers to those types of questions can be found in academic literature, available through your local research library."
Click to expand...

Oh well. Time to look for an economist professor.

 
Originally posted by: Qacer
I decided to email the Federal Reserve to see if they can answer my question:

<div class="FTQUOTE"><begin quote>
"Hi there! Recently, I've enjoyed reading introductory articles regarding the economy from currency, interest rates, etc. I was reading an article about the relationship of interest rates, the monetary supply, and inflation. I am curious. In a what-if scenario, if a huge supply of money suddenly disappears (fire, acts of God, etc.), well that decrease the monetary inflation of a country? Thanks!</end quote></div>

I got the following reply:

<div class="FTQUOTE"><begin quote>
"Thank you for your recent correspondence to the Federal Reserve Board.

I regret but I am unable to answer hypothetical questions. Answers to those types of questions can be found in academic literature, available through your local research library."</end quote></div>

Oh well. Time to look for an economist professor.
Click to expand...
Damn Federal Reserve robots.
 
Theoretically, if you remove currency from circulation it will increase the purchasing power parity of the currency, reducing inflation. However, it'll also undermine the confidence in the central bank.
 
The paper money we use is not backed by anything thus it has no real value, it has value because the gov says it does. It used to be you could take your cash in and get gold/silver for it. Not anymore. If a large sum of money was burnt or destroyed, the US mint would just produce more notes to make up for the loss.
 
"lesser money" lolz.

Banks are FDIC insured.

Such a small % of money is in hard cash currency that you could remove it all without a huge effect.

The way banks loan out money is according to a reserve-deposit ratio. This ratio is given to them by the Federal Reserve board (i think). So if they hold $100,000 in deposits, and the reserve deposit ratio is 10%, they can loan out $1,000,000. They hold very little money in their vaults.

The bigger issue regarding inflation is the fed rate. Everything is done electronically nowadays.

So Bruce Willis's diehard II never happened.
 
for FDIC insured banks, no. they'll just print more cash to replace what was stolen. up to the limit of $100,000 per depositor (that limit hasn't gone up in a long time, seems to me). value is all just entries in ledgers, the paper currency isn't all that important.
 
Originally posted by: ElFenix
for FDIC insured banks, no. they'll just print more cash to replace what was stolen. up to the limit of $100,000 per depositor (that limit hasn't gone up in a long time, seems to me). value is all just entries in ledgers, the paper currency isn't all that important.
Click to expand...

You're assuming they'd print, technically they wouldn't have to.

As to the guy above who said the currency has the value that the government says it has. You couldn't be further from the truth. The currency has the value that the whole world and the holders of that currency place upon it. If the market thought our currency should be worth 1/10th of what it is now, it'll depreciate by 90%.

The market doesn't think that because it agrees that the US economy will support the currency and the government (aka the people) will pay its debts. Thus, instead of being based upon a industrial commodity the currency is based upon faith commodity. The faith that the American people will continue to prosper economically.
 
Originally posted by: mylifeforaiur
"lesser money" lolz.

Banks are FDIC insured.

Such a small % of money is in hard cash currency that you could remove it all without a huge effect.

The way banks loan out money is according to a reserve-deposit ratio. This ratio is given to them by the Federal Reserve board (i think). So if they hold $100,000 in deposits, and the reserve deposit ratio is 10%, they can loan out $1,000,000. They hold very little money in their vaults.

The bigger issue regarding inflation is the fed rate. Everything is done electronically nowadays.

So Bruce Willis's diehard II never happened.
Click to expand...

Come on, man, that was III
 
??? 3 was teh airport? or was it two? ooops

and I would say the value of the dollar is based on demand, which i guess is based on faith.
 
2 was the airport....3 was the Fed Reserve w the gold. Also, and I'm by no means a finance major so I'm pulling this out of my ass, since gold is a finite (or at least limited) resource I would think there would be at least some validity to the plot. You can't reprint gold.
 
Nope. The gold/silver standard was dropped early last century. You can, however, correlate the value of a country's currency to their GDP. You need that country's currency to do business with/within that country.

edit: yep Legend's right. Bretton Woods is based on gold and was dumped 1971.
 
Originally posted by: mylifeforaiur
Nope. The gold/silver standard was dropped wayyyyyy back early last century. You can, however, correlate the value of a country's currency to their GDP. You need that country's currency to do business with/within that country.
Click to expand...

The gold standard really has no bearing on the conversation. A currency's worth, even if not pegged to a underlying good, is diluted by too much currency. The gold standard wasn't dumped until the last 30 odd years.
 
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