4 ms·
Here's what the Fed says: "The amount of reserves that a depository institution must hold against specified deposit liabilities." http://www.federalreserve.go
by stretchwithme 11y ago
Here's what the Fed says:
"The amount of reserves that a depository institution must hold against specified deposit liabilities."
http://www.federalreserve.gov/newsevents/reform_glossary.htm http://www.federalreserve.gov/newsevents/reform_glossary.htm
And here's a table showing the exact percentages of DEPOSIT liabilities:
https://www.federalreserve.gov/monetarypolicy/reservereq.htm#table1 https://www.federalreserve.gov/monetarypolicy/reservereq.htm...
It doesn't get more definitive than that. And if it were a multiplier, how much can a bank lend out if they have less than $15 million in deposits? Infinity?
- ThomPete 11y agoA bank that doesn't loan out more than it has is not involved in FRB. FRS is the act of central banks allowing banks to add money on accounts up to the ratio amount. In other words. Banks can create money "out of the blue" since most money are just numbers and not actual cash. Lending out money this way is not affecting any other accounts. No money is being taken from somewhere and put into the lendees account. Instead banks are allowed to create the loan which is debt, not to the bank but to the lendee. To the bank this is an asset to the lendee this is debt. In other words the bank have more money after they give the loan not less. It doesn't get much clearer hat than that IMO.
- stretchwithme 11y agoI know you think it works that way. But can you point to any authoritative evidence that it works that way? A simple statement on a Federal Reserve web site stating that such a bank has to keep deposits and that the loan comes from new money created should be sufficient.