41–50 of 99 posts
“ Many economists and bankers now realize that the amount of money in circulation is limited only by the demand for loans, not by reserve requirements.”
https://en.wikipedia.org/wiki/Money_creation#Credit_theory_o...
End central banking and you've single-handedly fixed systemic wealth inequality in the United States.
Doesn't this eliminate the protections from 2008? Will this cause a run on the banks?
No, it doesn't. Broader capital requirements are still in place. This move just removes reserve requirements for certain categories of transaction accounts.
One day people are going to look back to today and wonder why we have essentially given a license to print money to a privileged group of people with close to nil accountability. First to central bankers, and now to private bankers (which collect a profit from literally creating money out of thin air and lending it out). Our entire fiat monetary system really is incredibly bizarre and borderline fraudulent when you t…
Bank regulation is open to be criticized. But it's far from "nil".
> First to central bankers, and now to private bankers
Money was originally printed by private parties, then by banks, and most-recently by central banks.
With the caveat that I’m by no means an economist... The table at the bottom puts this in context: reserve requirements, which have never been reduced by more than $2 billion across the economy in any year prior, are suddenly reduced by $200 billion - the entire regulatory program seems to have been unwound. Presumably this will give late banks desperately needed liquidity and ability to lend, but it also increases s…
It's completely insane that they describe this in linear terms. The effects of reducing the reserve requirement is inverse-linear with respect to the ratio. Since the money multiplier is 1/r, reducing the reserve requirement to 0 means that any dollar has an unbounded limit as to how far it can be re-lent. That is quite literally infinitely more unprecedented than a 100x bigger dislodging of the "reduction in the res…
It would seem that the logical response to this announcement is go run the banks right now, before March 26, and before anyone on Fox and Friends thinks to mention to their viewers what this really means.
This would be my take on it as well. However, a pile of government printed paper may not be worth much anyway in a worst case scenario.
Or is this going to turn into Greece where all banks will close or limit the amount that can be withdrawn.
What a shit-show this has become
EDIT: another thing to consider is where to store all this cash if you withdraw. For those that have 6 figs in cash sitting in their banks, exposing that large sum of money in physical form poses an enormous risk (e.g. natural disasters or accidents being a big one)
I'm not an economist, but it seems like the problem is a destruction of demand, so how does increasing supply help things?
Money supply.
If you're a company who invested in a great workforce, and is getting nuked due to demand destruction, borrowing to keep paying them is a savvy long-term bet.
If you can't borrow, you'll have to let them go. That not only creates human misery. It also destroys the human capital you carefully built.
Unintended Consequences. Wow -- this sets up all sorts of moral hazard for later. And unwinding this will be extraordinarily difficult.
The average person has zero idea that this happens, but it's not going to somehow be impossible (or even hard) to undo it.
Earlier quoted context omitted.
It's completely insane that they describe this in linear terms. The effects of reducing the reserve requirement is inverse-linear with respect to the ratio. Since the money multiplier is 1/r, reducing the reserve requirement to 0 means that any dollar has an unbounded limit as to how far it can be re-lent. That is quite literally infinitely more unprecedented than a 100x bigger dislodging of the "reduction in the res…
The reserve requirement limit is purely theoretical anyway, since the Fed is obliged to pump more reserves into the system to maintain its interest rate targets when commercial banks [net] lend in excess of their current reserves anyway. The UK hasn't had a reserve requirement since 1981.
Capital requirements remain in place, for both British and American banks. (As remain reserve requirements for most assets at American banks.)