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What do you buy capital Bonds/ equity with? Bank deposits. The more deposits there are the more demand there is for bank capital in aggregate. The system reac
by neilwilson 8y ago
What do you buy capital
Bonds/ equity with?
Bank deposits. The more deposits there are the more demand there is for bank capital in aggregate.
The system reaches an equilibrium at a price not a quantity. The quantity floats as required by the price of money.
Reserves are always available since the other banks lend them out and the central bank as lender of last resort. They have no control function in quantity. Only in their price.
- pas 8y agoYou can buy bonds with credit, and that is limited by risk, as you say. That's why banks like deposits, they are cheap, and thus they can lend out cheaper.