this link – http://www.hussmanfunds.com/html/fedirrel.htm contains the following excerpt – “…a change came in the 1970s with the emergence of money market funds, which require no reserve requirements. Then in the early 1990s, reserve requirements were dropped to zero on savings deposits, CDs, and Eurocurrency deposits. At present, reserve requirements apply only to “transactions deposits” - essentially checking accounts. The vast majority of funding sources used by banks to create loans have nothing - nothing - to do with bank reserves. These days, commercial and industrial loans are financed by issuing large denomination CDs. Money market deposits are largely used to lend to corporations who issue short term commercial paper. Consumer loans are also made using savings deposits which are not subject to reserve requirements. These loans can bunched into securities and sold to somebody else, taking them off of the bank’s books.”…"The point is simple. Commercial, industrial and consumer loans no longer have any link to bank reserves. Since 1995, the volume of such loans has exploded, while bank reserves have actually declined ."
is the above posted information at odds with portions of the (claimed) dr. reisman article where it states –
"For the three years 2001 to 2004, the Federal Reserve created as much new and additional money in the form of additional bank reserves as was necessary to drive and then keep the federal-funds rate below 2 percent. And from July of 2003 to June of 2004, it drove and kept it even further down, at approximately 1 percent. The new and additional money created by the banking system on the foundation of these new and additional reserves appeared in the loan market as a new and additional supply of loanable funds."
http://mises.org/daily/3556
can anyone clarify what seems to me to be somewhat opposite thing s being said?
thanks
i received an email shortly after this post stating…“The reductions in reserve requirements are the source of new and additional Excess reserves.”
i dont know why the sender capitalized the word Excess.
this is still rather unclear to me as far as answering my question about the two articles i posted a question about…the first link says that reserves have no bearing on bank lending whatsoever…the (claimed authorship) reisman article specifically says
" new and additional money created by the banking system on the foundation of these new and additional reserves appeared in the loan market as a new and additional supply of loanable funds."
and i guess these new loanable funds were lent?
either reserves with the Federal reserve system affect the money-things that banks lend or they dont as stated in the first linked article excerpt.
“The reductions in reserve requirements are the source of new and additional Excess reserves.” gee…where? reduce reserves to make Excess reserves appear where?
that makes no sense to me.
clarification appreciated
Well if reserves remain the same and required reserves decrease, would that not imply excess reserves (i.e. those over and above required reserves) will increase? At least that’s what I think it implies.
this would be easier to discuss if he provided figures or estimated a rough figure based on some other figures. this is a little too handwavey to respond to confidently.
he has gone from:
money thats in some class of account can be loaned out with no reserve requirements , whilst lending money deposited to other accounts is limited because reserve requirements are inforce. therefore, reserve requirements have no force.
if posters at mises truly are knowledgable about the federal reseve system i would think that the articles wouldnt be too difficult to dispute.
ok. as far as the Excess reserves forming due to reductions in various account-type
reserve-requirements…that i can see.
my initial thoughts on reading that was “arent excess reserves meaningless in a reserves-reduction scenario.”
i.e., once reserve-requirements are lowered the ‘excess’ is rapidly lent being excess only for a very short time – that along with the claims that reserves have no bearing on lending seemed and still is confusing.
does this in anyway contradict the reisman article claims of ‘reserves pushing commercial bank lending’?
“Every bit of increase since January 1994 is accounted for by currency in circulation, not bank reserves. Over the past year, the Fed has eased very aggressively, buying about $32 billion in Treasuries, with a corresponding $32 billion increase in the monetary base. Now look closer. Total bank reserves actually declined by $1 billion while currency in circulation has increased by $33 billion.”
http://www.hussmanfunds.com/html/fedirrel.htm
does this in anyway contradict the reisman article claims of ‘reserves pushing commercial banjk lending’?
is someone just wrong?
ha well, thank you. if inquisitive posters really would like assistance in sorting through their problems I would think that structuring their query wouldnt be too difficult to do.
you want to know whether Reisman is wrong? no.
i guess you mean that the reisman article is true and correct?
and that the statement
“the vast majority of funding sources used by banks to create loans have nothing -nothing to do with reserves”
which is at the link that i posted earlier is factually wrong and untrue.
i will attempt to contact the author of the above information.