A physical gold transfer from BankA to BankB within the asme vault .. gold bars are physically relocated from one room to another room.

A 9b (or 100k FAST) transfer from SCB to BOC .. I feel there should be some physical movement. With both banks’ written agreement (persisted on immutable storage), some assets should be physically moved. The amount of assets controlled by SCB must reduce by 9b. Which system controls and enforces the amount of assets owned by SCB vs BOC vs other banks? We can’t let SCB control it, so a third-party is needed… how about the central bank?

Opening eg: If you are planning retirement, then ask yourself how soon you need to withdraw your deposit. If some amount might remain indefinitely in the bank, to be passed down the generation, then don’t worry about that amount. If a big amount (say, 700k) would be withdrawn in your lifetime, then you need to assess how soon you need it. If you need 100k fairly soon, then some of the institutions are unsuitable, including hedge funds. You would need something closer to a safe_deposit_box.

(I will use POSB or citibank as the stereotypical bank.)

— simple case: gold necklace stored in a bank’s safe_deposit_box. It’s not “usable” by POSB productively, so POSB pays you no interest.
— bank savings account.. the most common (and important) case.
For a bank, risk capital is any money to be lent out at some prime rate. In another simple example, risk capital can also be invested in stocks. Risk capital can also go into a FX inventory, which is required for a FX dealer desk.

Every 1k deposited in a simple savings account can be withdrawn any time, so by right POSB can’t invest it as risk capital. Based on statistics, most (like 90%) of the deposit amounts “stay” with the bank for a month or longer. Therefore, POSB does invest (bulk of) those deposit amounts as risk capital, but it really doesn’t matter, because there are many layers of buffers/contingencies whenever POSB receives a large withdrawal request — POSB can borrow in the overnight market; POSB can liquidate certain securities; Central bank could step in;;;

These well-developed “resources” basically mean that there’s zero chance that your withdrawal would fail. Given the high confidence everyone has in the system, we can safely assume that your 1k is as liquid as in a safe_deposit_box like gold coins, and available whenever you need it.

When you earn and deposit 1k to POSB, both POSB and you see a 1k increase in available asset. This is one example of how 1k multiplies to 2k
* Whether you add to time deposit or savings account, your net worth increases by 1k. This new 1k is ultimately owned by you but you let POSB use it productively [i.e. lending to people who need it].
* POSB has up to 1k additional risk capital for lending, so its balance sheet increases by (up to) 1k. If the 1k is in a 3Y time deposit, then POSB would be even more confident using this risk capital. This confidence is based on statistics.

Another important example of how 100k multiplies to 200k+… An investor/immigrant earns[1] and deposits 100k into citibank, to set up a company. Her immigration visa basically requires her to keep the money invested in a local business for a few years. Given this commitment, the local economy expands by (at least) 100k. The investor herself is obviously 100k richer due to [1]. citibank balance sheet also expands by 100k.

— CPF .. your “deposit” is held long term at the cpfBoard, similar to a time deposit. Therefore, your 1k is invested by cpfBoard as risk capital in risky assets. Thanks to similar “resources”, there’s zero chance your withdrawal would fail. Therefore, you can safely assume a time-restricted safe_deposit_box

Beside individuals, a family can be owner of an asset. A company can be owner of an asset.  A government can be owner of an asset. Some may argue that the GIC or Temasek assets are ultimately owned by citizens, but I would say “not so simple”. There are constitutions governing the ownership and control of these collective assets.
— tenant deposit .. landlord is supposed to keep it in a safe_deposit_box, but I don’t think any country’s tenancy law has that requirement. Landlord can and do use the deposit as risk capital. At move-out, if the withdrawal amount is large, then this “bank” can fail.

“Ownership” is important concept here — the deposit is tenant’s asset.

— hedge fund .. as client, your money (not “deposit”) is risk capital, and there is a contractual understanding that you could lose most or all of your risk capital, esp. if you withdraw too early. If you commit for 5Y, then there is often contractual promise (not “guarantee”) of a minimum return. If there is a promise, then you can assume a safe_deposit_box, similar to the CPF scenario.

When you earn and invest 1M with a hedge fund, both you and the fund see a 1M increase in asset.
* your net worth increases by 1M. This 1M is ultimately owned by you, but you give control to the hedge fund for a few years.
* the hedge fund’s AUM increases by 1M
— Mufu .. your 1k buys, say, 88 units of the fund. Those 88 units are held in a digital safe_deposit_box bearing your name. However, the unit value fluctuates, so you can lose all your money.