3 ms·

Thanks for taking the time to reply, it was informative. To summarize: banks aren't constrained by reserve ratios because they can borrow reserves from other ba

Thanks for taking the time to reply, it was informative. To summarize: banks aren't constrained by reserve ratios because they can borrow reserves from other banks or, if total reserves are low, from the central bank whose policy is not to let total reserves get low due to the impact on interbank rates. Is that correct? Do you work in finance? Can you recommend any books on money?

nhaehnle 13y ago
That is correct as far as my understanding is concerned. And again, I think it's important to point out that this doesn't mean that banks are unconstrained, it just means that the constraints are somewhere else (capital requirements and internal risk calculations mostly). I do not work in finance, but I became curious about such things when the financial crisis hit. I ended up reading (among other things) Understanding Modern Money by the economist Randall Wray and the more populist 7 Deadly Innocent Frauds by the former trader Warren Mosler. Those books were the first time that I glimpsed a coherent view of what "reserves" and related topics are (seriously, almost every traditional media mention of the word "reserves" is a bit confused in some way - this really should be a topic in school curricula). Since then I've just been piecing more things together by following blogs and tracing their statements back to original papers, including things like the actual text of the Basel regulation agreements and corresponding national laws (of Germany, where I'm from) and central bank publications.
- foobarqux 13y ago
  Thanks again