Bank reserves feature prominently in Economics 101 discussions of banking. As is entirely typical for Economics 101 macroeconomics, the topic is either taught incorrectly or in a misleading fashion. Bank reserves — better referred to as “settlement balances” — are just private sector bank deposits at the central bank. If you know what a bank deposit is, you know what a “bank reserve” is....Bond Economics
Bank Reserves Demystified
Brian Romanchuk
“ are just private sector bank deposits at the central bank. ”
ReplyDeleteThis is not a very good description…. Would lead someone to think somehow a depositor would have a direct deposit with the central bank…
Maybe: “assets of depositories in the form of a direct liability of the central bank”
And another thing while this is somewhat true:
ReplyDelete“ With the abolition of reserve requirements in the United States,”
They actually set the RRR to 0%…
They still are making depositories possess 3.3T of reserves while deposits are 19T… so RR at about 17%…