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Seriously, banks don't lend reserves: http://www.economonitor.com/lrwray/2013/08/15/banks-dont-lend-reserves-who-knew-mmt-thats-who/ http://www.economonitor.co

Seriously, banks don't lend reserves: http://www.economonitor.com/lrwray/2013/08/15/banks-dont-lend-reserves-who-knew-mmt-thats-who/ http://www.economonitor.com/lrwray/2013/08/15/banks-dont-len... http://www.forbes.com/sites/francescoppola/2014/01/21/banks-dont-lend-out-reserves/#6d97ffea3594 http://www.forbes.com/sites/francescoppola/2014/01/21/banks-... It's a fascinating subject when you start to dig in it.

Retric 11y ago
Link bait, but it's in agreement with what I said. "Rather a ratio of two loosely connected numbers has fallen dramatically" In other words banks create a 'fixed' multiple of the money supply worth of debt. In the long term inflation comes from new money not normal bank loans.
- RobertoG 11y ago
  About the 'fixed' multiplier: I'm going to paste from the paper that this, already old, thread is discussing. This come from the Bank of England and it's not precisely hidden in the text: "Money creation in practice differs from some popular misconceptions — banks do not act simply as intermediaries, lending out deposits that savers place with them, and nor do they ‘multiply up’ central bank money to create new loans and deposits." I doubt I could be more clear than that. About the 'link bait' thing: I'm not related to none of those sites so, if you are suggesting that I'm linking those because I get some kind of profit consider me offended.
  - Retric 11y ago
    'fixed' might have been unclear. 'Limited' is probably a better description. Which is why 'in practice' is such an important part of that statement. Banks are old and they have already added that multiplier. So, the multiplier effect is real, it's just already baked into the current money supply. Of note, it's the reverse that's important. When banks stop making loans or loans default the money supply shrinks. PS: By link bait I mean the title is provocative and on tangentially related to the article. Like a title that said "future earnings irrelevant to stock price" and then saying future earnings don't alter stock price as there already baked in, its changes to future earnings projections that's important.

Retric 11y ago

Link bait, but it's in agreement with what I said. "Rather a ratio of two loosely connected numbers has fallen dramatically" In other words banks create a 'fixed' multiple of the money supply worth of debt. In the long term inflation comes from new money not normal bank loans.

RobertoG 11y ago
About the 'fixed' multiplier: I'm going to paste from the paper that this, already old, thread is discussing. This come from the Bank of England and it's not precisely hidden in the text: "Money creation in practice differs from some popular misconceptions — banks do not act simply as intermediaries, lending out deposits that savers place with them, and nor do they ‘multiply up’ central bank money to create new loans and deposits." I doubt I could be more clear than that. About the 'link bait' thing: I'm not related to none of those sites so, if you are suggesting that I'm linking those because I get some kind of profit consider me offended.
- Retric 11y ago
  'fixed' might have been unclear. 'Limited' is probably a better description. Which is why 'in practice' is such an important part of that statement. Banks are old and they have already added that multiplier. So, the multiplier effect is real, it's just already baked into the current money supply. Of note, it's the reverse that's important. When banks stop making loans or loans default the money supply shrinks. PS: By link bait I mean the title is provocative and on tangentially related to the article. Like a title that said "future earnings irrelevant to stock price" and then saying future earnings don't alter stock price as there already baked in, its changes to future earnings projections that's important.