How a Pandemic Can Cause a Cash Crunch

Corporate Lines of Credit: ATM’s for Business

[Note to Readers: The views expressed here are solely those of Ross Kaplan, and do not represent Edina Realty, Berkshire Hathaway (“Berkshire”), or any other entity referenced. Edina Realty is a subsidiary of Berkshire.]

To understand the stress on the financial system now, start with millions of people rushing to their ATM’s to stock up on cash.

If 100 million households each withdraw $500, that equals $50 billion.

$50 Billion vs. $500 Billion

Now, imagine 100,000 U.S. businesses each maxing out their lines of credit with the various banks they do business with.

If each company has, on average, $5 million in available lines of credit, that comes to a cool $500 billion. 

Call it, wholesale vs. retail demand for cash.

Can’t quite make sense of it all?

Fortunately, the Federal Reserve can — and under Chairman Jerome Powell, appears to be capably responding to the crisis (at least, the financial part) . . .



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