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Sooner or later part of these 100 trillion trillion dollars will be withdrawn from the originating bank and deposited with other banks. The originating bank wi
by lottin 4y ago
Sooner or later part of these 100 trillion trillion dollars will be withdrawn from the originating bank and deposited with other banks. The originating bank will have to send reserves to these other banks, and if it can't because it doesn't have enough reserves, the bank will fail.
But the reason most countries no longer have reserve ratios is because these ratios have been replaced with capital requirements, which likewise constrain bank lending activity. Apparently some people didn't get the memo though, and think banks are now unregulated and can do whatever they want. In reality the banking sector is one of the most regulated industries, and for a good reason.
- Consultant32452 4y agoI believe that change is the cover story to prevent a cascading bank failure. We made it illegal to go to work for a year, we were at a serious risk of a deflationary spiral and the fed did a LOT to flood the economy with dollars. That appears to be one of them. Similarly, if you go look at the M1 money supply chart you see that vertical line. The average person goes "WTH!!" and they are told "The vertical line is where we changed how the M1 is calculated" and the average person goes back to sleep. But even a middle schooler knows you can't just arbitrarily change how the Y axis is calculated mid-stream. It makes the chart useless. They could have back-filled with the new way of calculating or forward-calculated with the old way for some period of time. The chart is useless on purpose. It's friction between an average viewer and understanding what happened in the economy. And only "weirdos" and "conspiracy theorists" bother to overcome the friction to try to figure out what goes on.