Did QE Make Banks Say No To More Money? 3
Large US banks are turning away deposits from their biggest corporate clients. This comes with second order effects that can ripple through the broader system.
Large US banks are turning away deposits from their biggest corporate clients. This comes with second order effects that can ripple through the broader system.
Why would a bank turn away deposits? Before we can answer that, we need to understand what deposits are to banks, and how they are related to bank reserves.
Big American banks are turning away large corporate deposits as QE and regulatory changes have left them with too many reserves. What does this all entail?
Bank reserves have exploded higher because of the Fed’s QE. This explosion in reserves, has not, however, led to a corresponding explosion in GDP growth rates.
If Fractional Reserve Banking does not work because banks do not lend Reserves, doesn’t that mean Central Bank policy, i.e. QE, does not work as advertised?
Fractional Reserve Banking is not what actually happens in the real economy, because banks do not lend Reserves. How then is money created?
Explaining what Fractional Reserve Banking is, and how it works together with the Reserve Requirement Ratio to theoretically multiply money.
What are bank Reserves? Simply put, bank Reserves are how banks settle transactions (bank transfers from one client to another) between each other.