In his recent article published in Mises Daily, Thorsten Polleit explains how central bank money and equity capital is used by banks and the banking system to create money and credit. As an example, he mentions that with a reserve ratio of 2%, the banking system can produce $50 out of $1. Later on, however, he shows how, “with a central-bank money supply of $1, banks produced around $211 of bank credit in August 2008”. This would mean a reserve ratio of less than 0,5%. Isn’t this ratio too low to comply with banking regulations?
There are plenty of things for which reserve requirements are zero…
Thank you!