The Murphy Check-Deposit Index of the Economy
You know what I’ve noticed in the last month or so? Individuals and businesses are depositing my checks far more rapidly than they used to. For example, I pay my AmEx bill online, and in the past it typically took 2 full business days before the payment would actually hit my checking account. But the last one I made took a few hours.
And I’ve noticed it with a bunch of other businesses and individuals, too. When I send somebody a check, I calculate how long the Post Office will take, and then I assume it’s getting deposited the moment the person gets it. (Obviously that’s how you’re supposed to treat your outbound checks, so that nothing ever bounces. I’m just saying, I have definitely noticed that people aren’t sitting on my checks like they used to.)
Of course, I’m doing the same thing with the checks I receive. A year ago, I might have let a few of them accumulate before making a trip to the bank. But now–partly because everybody strings out the time before they actually send the payment in–I am running to the bank several times a week, because things are tight.
Thank the Fed (or is that the FED)
http://www.federalreserve.gov/paymentsystems/over_about.htm
Also, back in business school 20 something years ago the story goes that American Express changed their locations where you’d send your payments. Thus there were locations throughout the US that you’d send your payment to and then someone from American Express would be at the post office ready to take the bag(s) with them to a private plane and fly it to their bank so they could cash it saving one or two days without waiting for the post office. Now days, thanks to the Fed, it is all electronic and they really don’t want to deal with the paper anymore. (There’s some kind of irony in there I know.)
It used to take MasterCard up to five business days to process my online payments. I made my last payment on Friday afternoon, and by the time I checked on Monday afternoon it had already gone through.
The Miracles of Capitalism.
Again, I want to raise an off-topic question: the Keynesian formulas do not contain a variable for population size. Therefore, they should be invariant with respect to population size. Of course, they are not – they do definitely not work for poor Robinson Crusoe living solitarily on his island. But this will not change if you introduce another person, a third, a fourth, and so on. So, if these formulas are not valid for n persons living on that island, there is no reason to assume that they will work with n+1 persons. But there must be some grave error within my line of reasoning – it cannot be that easy to refute Keynesianism.
I hated writing a check for my daughter’s summer camp. It would take nearly 10 days to clear. What the heck were they doing with that check for a full week?
Has this particular effect been discussed with regards to prices? It seems like it could be commented on, at least to say that when people cash checks faster in hard times, it “helps to keep deflation at bay.”