The Sveriges Riksbank (a.k.a. Riksbanken), the Swedish central bank, tried an innovation in monetary policy two years ago in July 2009 when it set the official deposit rate at a negative interest rate of -.25%. The objective was to stimulate and motivate banks to lend their "excess" reserves to businesses and households and to therefore … Continue reading Innovation in Monetary Policy in Sweden Works: Negative Interest Rates
bank reserves
Excess Bank Reserves: Theory vs. Reality
In the macro econ textbooks, the mainstream explanation for money creation is the story of fractional reserve banking where reserves limit the amount of loans made. In the traditional theory, the central bank (The Fed in U.S.) controls the amount of reserves banks have through either reserve reqmts or open-market operations. Commercial banks are supposedly … Continue reading Excess Bank Reserves: Theory vs. Reality
More on Modern Banking – end of fractional reserves
More on MMT & end of fractional reserve banking: From Naked Capitalism and Washington's Blog. There's more in the entire post to see, but this is a critical part (bold is mine): ... From Fractional to Fictional Reserves But whatever you think about fractional reserve banking, whether or not you agree with its critics, the … Continue reading More on Modern Banking – end of fractional reserves
Banks Create Credit Out of Thin Air
From Washington's Blog: More Evidence that Banks Create Credit Out of Thin Air I recently provided evidence that banks create credit out of thin air. I've just found two more pieces of evidence: (1) William C. Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York, said in a speech last … Continue reading Banks Create Credit Out of Thin Air
Loans Create Reserves, not Vice Versa
From Washington's Blog - 7 Questions About Public Banking This is an open letter to the economics, finance and banking communities. I don't have any dog in the fight, other than to figure out and then publicize what is best for the greatest number of people. People I greatly respect advocate for federal-level public banking, … Continue reading Loans Create Reserves, not Vice Versa
EconProph 