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I'm also interested why the FED would want to do this. Could it be to maintain interest rates at a certain target? If the banks don't have money to lend, would
by samsolomon 7y ago
I'm also interested why the FED would want to do this. Could it be to maintain interest rates at a certain target? If the banks don't have money to lend, would it cause them to charge higher interest on their loans?
- PeterStuer 7y agoBanks don't actually need money to lend money. They just create a loaned amount credit in one account and a corresponding asset consisting of a future revenue stream on the other side. The cash reserve is just a collateral against the risk, needed to stabilize public trust they will not default at the slightest ill wind.