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>We’re doing zero fractional reserve banking now. No; we're not. In fact, banks are positively awash with reserves by historical standards. https://fred.stlou

• nostrebored 4y ago
  The required reserve amount was reduced to zero at the beginning of the pandemic as a way to increase the velocity of money. We are in ZFRB land right now. Bank reserves have obviously dropped year over year since the introduction of this policy, especially as a percentage of M1/M2.
  • kasey_junk 4y ago
    You are describing their reserve requirements at the fed itself. Nothing has changed with their A&L requirements from the variety of banking regulators (including the fed & fdic). For comparison there were rumors that Credit Suisse was in trouble when r their asset to liability mix got around 1.65. That is they marked their assets to 165% of their liabilities and it was a major issue.
  • NovemberWhiskey 4y ago
    >The required reserve amount was reduced to zero at the beginning of the pandemic as a way to increase the velocity of money. No; again. The Fed moved from a 'scarce reserves' regime for monetary policy to an 'ample reserves' regime; that was announced in 2019. Since the 'ample reserves' approach doesn't depend on bank reserves to implement short-term rate management, there wasn't really a need for an ongoing Fed reserve requirement. >Bank reserves have obviously dropped year over year since the introduction of this policy, especially as a percentage of M1/M2. Bank reserves increased hugely from 2019 through the middle of 2021, as you can see from the chart I posted. Although they've dropped somewhat since then, they're still like 75x what they were in say 2007.