A:

Technological advances have reduced float by enabling faster processing of checks. Funds now spend less time waiting for transfer by banking institutions. Paper checks are becoming increasingly less common, further reducing float by minimizing transportation of checks and eliminating delays caused by bad weather and the need for processing. Busy banking days and months often result in slowed processing and significant backlogs within the financial system. When this occurs, checks wait for recognition and funds may be double-counted. Until the transaction is complete, the financial system may consider the money to belong both to the recipient checking account and the party issuing the check. One dollar may be counted as two, making monetary policy more complicated. Float may eventually disappear as technology makes it less of an issue. On weekends, banking institutions are usually closed and unable to quickly process checks written on Saturdays and Sundays. Historically, these checks would wait for the next business day and create a backlog of paper checks waiting for processing by a bank employee on Monday. Technology is significantly alleviating these problems and making it easier for the Federal Reserve to track the health of the financial system.

The Federal Reserve Bank creates forecasts of float in the U.S. banking system to help in key policy decisions. The exact amount of float is difficult to track at any given time, so estimates are important in determining approximately how much money is actually in circulation. In the 1970s, float reached highs of $6.6 billion on average, every day. This subsequently declined to $774 million daily by 2000.

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