One way to stop deflation
Posted by Robbie53024 10 years, 2 months ago to Economics
Inflation occurs when there is more money in the system than there is economic growth. A fractional monetary system (where the bank only has to hold a small portion of what it receives as deposits and loans the remainder out, effectively creating money) adds to this situation by geometrically increasing the money supply.
Deflation occurs when the amount of money shrinks in relation to the economic activity.
By restricting the extraction of saved funds, what is happening is the restriction on deflation.
Deflation occurs when the amount of money shrinks in relation to the economic activity.
By restricting the extraction of saved funds, what is happening is the restriction on deflation.
SOURCE URL: http://www.bbc.co.uk/news/business-25861717
Thisn is certainly not a huge amount of money, but it is larger than most (at the time this occurred).
The rule is to prevent depositor from pulling all the cash from a bank in case a "bank panic" occurs.
Just be careful about where you money is and the rules a bank my impose at their discretion.