> Bank X, subject to a 10% reserve requirement, is then free to lend out, that is create deposits, representing up to $10. The Fed “created” $1 but the commerci

> Bank X, subject to a 10% reserve requirement, is then free to lend out, that is create deposits, representing up to $10. The Fed “created” $1 but the commercial bank, X, “created” $9. Please stop it with the reserve requirements. Canada (amongst others) hasn't even had them for for many, many years: * https://en.wikipedia.org/wiki/Reserve_requirement#Canada https://en.wikipedia.org/wiki/Reserve_requirement#Canada Relending customers' money hasn't been a thing for decades. Tobin called this the "Old View" in 1963: * https://cowles.yale.edu/sites/default/files/files/pub/d01/d0159.pdf https://cowles.yale.edu/sites/default/files/files/pub/d01/d0... > Business schools teach that banks obtain deposits and then leverage those deposits ten times or so. This is why we call the modern banking system a fractional reserve banking system. Banks supposedly lend a portion of their reserves. There’s just one problem here: banks are never reserve constrained. Banks are always capital constrained. This can best be seen in countries such as Canada, which has no reserve requirements. Reserves are used for two purposes—to settle payments in the interbank market and to meet the Fed’s reserve requirements. Aside from this, reserves have little impact on the day-to-day lending operations of banks in the United States. * https://www.pragcap.com/the-basics-of-banking/ https://www.pragcap.com/the-basics-of-banking/ > The role of reserves and money in macroeconomics has a long history. Simple textbook treatments of the money multiplier give the quantity of bank reserves a causal role in determining the quantity of money and bank lending and thus the transmission mechanism of monetary policy. This role results from the assumptions that reserve requirements generate a direct and tight linkage between money and reserves and that the central bank controls the money supply by adjusting the quantity of reserves through open market operations. Using data from recent decades, we have demonstrated that this simple textbook link is implausible in the United States for a number of reasons. * https://www.federalreserve.gov/pubs/feds/2010/201041/201041pap.pdf https://www.federalreserve.gov/pubs/feds/2010/201041/201041p... See Cullen Roche's 2011 paper "Understanding the Modern Monetary System": * https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1905625 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1905625 Interview: * https://rationalreminder.ca/podcast/132 https://rationalreminder.ca/podcast/132 See also the Bank of England's 2014 paper, "Money creation in the modern economy": > The reality of how money is created today differs from the description found in some economics textbooks: Rather than banks receiving deposits when households save and then lending them out, bank lending creates deposits. In normal times, the central bank does not fix the amount of money in circulation, nor is central bank money ‘multiplied up’ into more loans and deposits. * https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/money-creation-in-the-modern-economy https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/m...