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You went way over my head I'm afraid. I don't know how banks/reserves/etc work.
by lolsal 6y ago
You went way over my head I'm afraid. I don't know how banks/reserves/etc work.
- spiralx 6y agoI keep these bookmarked as they're about the simplest and clearest introductions to how economies work that I've found - and the Bank of England should know what they're talking about :) https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy.pdf https://www.bankofengland.co.uk/-/media/boe/files/quarterly-... https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-in-the-modern-economy-an-introduction.pdf https://www.bankofengland.co.uk/-/media/boe/files/quarterly-... Bank reserves aren't an important factor in the financial systems, they're there to ensure customers have access to money if they want to withdraw it and to allow banks to move money between each other. More importantly banks don't lend money out of their reserves (so-called "fractional reserve banking"), they simply add the loan amount to the customer's account and also to their own liabilities i.e. they "create" money.