Ah, I see. The problem is that banks can't really invest their reserve holdings because they need them to balance the deposit. The best they can do is shuffle i

Ah, I see. The problem is that banks can't really invest their reserve holdings because they need them to balance the deposit. The best they can do is shuffle it around the vertical circuit, that is, they can buy government bonds. They could also take a deposit at another bank (indeed, the whole system can run on that basis without reserves), but that would be strictly on less beneficial terms than a deposit at the central bank (because the corresponding bank would need to balance the deposit made to _it_). The mainstream idea is that swapping a fixed price floating interest financial asset (reserves) for a floating price fixed interest financial asset (bonds) somehow locks it up, but that's just wishful thinking. I'm not sure if in your final point your implying something about the quantity theory of money, which is something I reject (flows being the important measure). Perhaps you can clarify what you mean by destroying the value creation? Is this a statement about closed economies being less valuable than open ones?