51–60 of 99 posts
ELI5?
Say you have a bank account with $100 in it. At 100% reserve requirements, the bank must have that $100 actually in its possession at all times. This is very safe, because you are guaranteed to be able to withdraw your money in the event of a bank run. However, an economist might believe this is suboptimal because the $100 is just sitting there doing nothing rather than "circulating in the economy". Thus the concept…
There's a point where: 1)traditional policy tools are ineffective because as rates get to zero, cutting them doesn't really provide any kind of incentive any more 2)interventions get more and more extreme and reach the point where they actually can increase panic rather than reduce it It's pretty clear we're well past #1 and could be at #2. The problem that policy-makers are facing here is the real economic impact of…
> we're well past #1 and could be at #2 No we aren't. The discount window, central banks' original and most-powerful tool, was only just accessed by big banks [1]. [1] https://www.bloomberg.com/news/articles/2020-03-17/u-s-banki...
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…
End central banking and San Francisco will still be full of homeless people and rich people
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.
Is there a reason I shouldn't rely on the FDIC (or NCUA for credit unions) insurance?
Is the expectation that if banks systematically fail, FDIC won't be able to cover all of the losses?
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.
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…
> with close to nil accountability 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.
Bank regulation is political and is regularly criticised, I'll give you that. However, the Federal Reserve and central banking is borderline immune to any form of criticism from the electorate partly due to a lack of understanding but also due to the widespread perception that central banking is somehow a necessity in a well-functioning economy and that its operation and development should remain firmly in the domain of "experts" like economists and others. I blame out-of-control scientism in economics for this one.
>Money was originally printed by private parties, then by banks, and most-recently by central banks.
Apologies, I phrased my sentence badly. It was more of a figure of speech rather than a historical account.
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.
One would hope that the Fed wouldn't actually allow that to happen. But how does one re-impose reserve requirements without causing even more problems?
It's like in that one song: "And I don't know why she swallowed the fly. Perhaps she'll die."
On the upside, I suppose we'll now get to have an empirical test to settle that age old debate over whether the number of people allowed to print money should be one or many. Pity Bitcoin's in such a shambles, so we can't with clean conscience make it a test among zero, one and many.
Doesn't this eliminate the protections from 2008? Will this cause a run on the banks?
> Doesn't this eliminate the protections from 2008? No, it doesn't. Broader capital requirements are still in place. This move just removes reserve requirements for certain categories of transaction accounts.
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…
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…
> End central banking and you've single-handedly fixed systemic wealth inequality in the United States. End central banking and San Francisco will still be full of homeless people and rich people