> "Fractional reserve banking" is the thing to look up but, yes. No, it is not. Relending customers' money hasn't been a thing for decades. Tobin called this t

> "Fractional reserve banking" is the thing to look up but, yes. No, it is not. 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...