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Originally Posted by Ultimate Newbie
But storing the money wouldnt work; it would still "exist" in the financial system, and thus the expecations that it would be used, and thus doing nothing to alter the cash rate.
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Ehm. A Central Bank can alter the cash rate (marginal lending facility in European terms?) by just dictating numbers. Similiarily, hard cash reserves can be altered, and requesting higher hard cash reserves can be used to pull liquid money (the actual quids and bucks) off the market. The money yes would excist, at the Central Bank, but as the Central Bank itself isn't boud by reserve requirements, it's indifferent to the circulation. A central bank can just remove currency from domestic circulation by requesting banks to store more, and sit on them. Right?
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Originally Posted by Ultimate Newbie
what the cash rate is, and all financial institutions take this as a given, and then act in the economy.
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Can you confirm that "cash rate" equals the interest rate of the daily open market operations (ie. lending overnights to private sector), which would equal marginal lending facility? Cash rate isn't described in the ECB glossary, so just to know we're talking about the same subject here.
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Originally Posted by Ultimate Newbie
I would imagine that for all practical purposes, the Reserve Bank of Australia is effetively the same as the European Central Bank, the Bank of England, the US Federal Reserve et al. Mainly because they are expected to do the more or less same things in the more or less same way in the same financial system, so fundamentally they are the same thing.
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Yeah. ECB is just a more expansive one, I guess.
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Originally Posted by Ultimate Newbie
as such "printing" and "destroying" money is merely an alteration in a database somewhere
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Yeah. But the amount of money changes irregardless of how many bills you print, and how many bills you print doesn't really affect the economy, as long as you don't print more bills than there's actual money. Actual destruction of bills and coins seems vastly useless to me too. Could you elaborate why a central bank would destroy bills and coins, and what's the gain to it?