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The banks are only allowed to loan a certain amount. The department that prints mone6 is the same department that regulates how much can be lent by all banks (i

The banks are only allowed to loan a certain amount. The department that prints mone6 is the same department that regulates how much can be lent by all banks (in the US), so it is the same type of "creating money" as printing money is. And is accounted for when calculating "how much money is in circulation"

cjbgkagh 4y ago
It's called a reserve requirement ratio (RRR), the bank must hold a certain percentage of loans as cash. It's mostly a closed loop due to rehypothecation so money supply is proportional to RRR. It keeps getting cut and it's one of those expansionary policies you tend not to hear much about. It's been a long time since I paid attention to it but I think there was talk of using cash equivalents instead of just cash at which point given the fraudulent incompetence of rating agencies you might as well not have a RRR.
- JumpCrisscross 4y ago
  Australia hasn’t had a reserve requirement since the late 80s. They’re largely been phased out globally in favour of capital requirements and open-market operations.
  - cjbgkagh 4y ago
    Huh, indeed. I found this on the RBA website. "The Reserve Bank’s reserve requirements are not a Required Reserve Ratio (they are not set as a percent of the financial institution’s liabilities). The Reserve Bank’s reserve requirements are set annually as an AUD amount per financial institution with the aim of ensuring that each institution has sufficient funds to settle AUD transactions after business hours. The amount is set taking into account the historical pattern of each institution’s AUD transactions." Is there any information on what those figures are because it's kind of important when calculating money supply? If not the RBA could 'print' large amounts of money and not tell anyone.
    - deleted 4y ago
      [deleted]
    - JumpCrisscross 4y ago
      This sounds like the discretionary component of all capital-requirement systems. > the RBA could 'print' large amounts of money and not tell anyone The RBA publishes accounts and money-supply estimates. Also, all banks can create money. Estimating money supply from capital requirements isn’t precise.

cjbgkagh 4y ago

It's called a reserve requirement ratio (RRR), the bank must hold a certain percentage of loans as cash. It's mostly a closed loop due to rehypothecation so money supply is proportional to RRR. It keeps getting cut and it's one of those expansionary policies you tend not to hear much about. It's been a long time since I paid attention to it but I think there was talk of using cash equivalents instead of just cash at which point given the fraudulent incompetence of rating agencies you might as well not have a RRR.

JumpCrisscross 4y ago
Australia hasn’t had a reserve requirement since the late 80s. They’re largely been phased out globally in favour of capital requirements and open-market operations.
- cjbgkagh 4y ago
  Huh, indeed. I found this on the RBA website. "The Reserve Bank’s reserve requirements are not a Required Reserve Ratio (they are not set as a percent of the financial institution’s liabilities). The Reserve Bank’s reserve requirements are set annually as an AUD amount per financial institution with the aim of ensuring that each institution has sufficient funds to settle AUD transactions after business hours. The amount is set taking into account the historical pattern of each institution’s AUD transactions." Is there any information on what those figures are because it's kind of important when calculating money supply? If not the RBA could 'print' large amounts of money and not tell anyone.
  - deleted 4y ago
    [deleted]
  - JumpCrisscross 4y ago
    This sounds like the discretionary component of all capital-requirement systems. > the RBA could 'print' large amounts of money and not tell anyone The RBA publishes accounts and money-supply estimates. Also, all banks can create money. Estimating money supply from capital requirements isn’t precise.