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

Money Multiplier has Collapsed

From Yves Smith & Naked Capitalism  :   Guest Post: The Fed Is Responsible for the Crash in the Money Multiplier … And the Failure of the Economy to Recover Washington’s Blog. Greg Mankiw noted in January 2009: Econ prof Bill Seyfried of Rollins College emails me: Here’s an interesting fact that you may not have … Continue reading Money Multiplier has Collapsed