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The issue with reserves is that they are not money, they have no way of getting into the real economy, they just sit on bank's balance sheets. At the end of the
by martinko 5y ago
The issue with reserves is that they are not money, they have no way of getting into the real economy, they just sit on bank's balance sheets. At the end of the day, its up to commercial banks to create new, spendable money. The whole reserve thing is just to incentivize them.
- JumpCrisscross 5y ago> issue with reserves is that they are not money When talking about money and banking, the word "money" is useless at best. Reserves, Federal Reserve notes (i.e. paper money), coins, deposits, Treasuries, commercial paper, gold and wampum are each money. Central banks converting Treasuries and mortgage-backed securities into reserves lets commercial banks create deposits at greater scale. That ceteris paribus increases aggregate demand which can put pressure on broader price levels.