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Expansion through private debt used to be limited by bank reserve ratios. Of course now that reserve ratio is nominally 0, the limit imposed on this expansion

Expansion through private debt used to be limited by bank reserve ratios. Of course now that reserve ratio is nominally 0, the limit imposed on this expansion is a little more vague and uncertain. ---------------- >Used to as in when the currency was gold backed and not really fiat, you mean? Sure, but that also didn't work very well. I'm talking about fractional reserve banking. In 2020 the reserve ratio was eliminated (set to 0%). Was not at all referring to gold backed or gold standard.

kqr 5y ago
Used to as in when the currency was gold backed and not really fiat, you mean? Sure, but that also didn't work very well. Loans in a fiat currency are not limited by reserves. If there is high demand for money, private institutions will lend money and then borrow reserves at whatever rates they get to cover the difference.
- WalterBright 5y ago
  > Used to as in when the currency was gold backed and not really fiat, you mean? Sure, but that also didn't work very well. There was no net inflation from 1800-1914, and endemic inflation ever since.