The audits are complete and they are part of the public record. That Ron Paul/Rand Paul thing was a sham attempt to allow congress to second guess the Board of governors. They were lying by implying the fed is not audited. Of course it is regularly audited, both internally and externally. Is that where you get your information, from screwballs like Rand Paul that think we should go back to the gold standard!I might have known! If ever there was an indication that you are a lunatic -- this quote above is it! By the way this character from the UK, Morganist, is some kind of do it yourself economist. He puts all kinds of crap on ET that is just plain nonsense.
NO! In the U.S., fed Open Market operations have nothing whatsoever to do with providing banks with money to lend. Why do you think this buying and selling of bonds is referred to as Open Market? They buy and sell on the "open" secondary market. Again, what is this now, about the tenth time! , banks can borrow the money they lend out. They don't have to have it as excess reserves first, before they loan it. In fact they do all they can not to have excess reserves!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! If they had their way, they would NEVER have excess reserves.
I really think you are not understanding the process of bank handling funds. I understand that in the long term banks will want to reduce their excess reserves however there will be a temporary increase in its balance sheet when money is borrowed from other banks before the money is lent out. You have neglected the process of the bank receiving funds then converting the funds into loans. In terms of open market operations the link below explains that by the central bank or even any other bank buying assets a bank owns it provides a bank with more cash funds to lend out. Selling assets for cash extends a bank's ability to lend further, this is the process explained in the article below. https://www.investopedia.com/articles/investing/053115/how-central-banks-control-supply-money.asp
Some of the answers you give make me think it is the language difference from the US to the UK that creates you arguments, but others, when you reject a clear explanation in articles, make me think that you are just choosing to ignore the processes and tools that have been used by the central bank. An example is the reserve requirement you say that the central does not really use alterations in the reserve requirement. It has just happened, they have reduced the required reserve ratio to 0%. There is a link to a statement from the Federal Reserve website stating it below. https://www.federalreserve.gov/monetarypolicy/reservereq.htm I feel the whole thing has become irrelevant due to the interest rate mechanism being ineffective in controlling the economy. In the United Kingdom they have used pension saving changes and pension regulation reform to control the economy for the last decade. This has meant that inflation and interest rate have been kept at low levels making government debt repayment cheaper. Economic growth targets have also been achieved through pension economic control, if you look at the results that have been attained in the United Kingdom there are straight lines on the targets since they used pension control. See below. http://morganisteconomics.blogspot.com/p/success.html I feel that one of biggest problems with economics is that the impact of pension saving has not been appreciated. It is another saving mechanism like the interest rate mechanism and has tremendous impact on rate of consumption and business investment. Inflation, economic growth and even interest rates are moved by the pension saving rates, pension regulations and pension funds investments. This is where the real key to effective economic control is, managing pension saving. It doesn't cost anybody anything either, in fact it saves and can even make money, just managing how tax paid on pensions is paid saves billions each year.
Banks don't have to sell assets to make loans, AND you have the order of these transactions backwards. The bank will correct their reserve balance, as needed, via the interbank fed funds market, after they make a loan, not before.
Fine then we have worked out what the difference is between the US and the UK. Regardless of whether banks have to sell assets to make loans or not they do. In the United Kingdom the central bank will purchase assets banks hold to provide the bank with cash, which it can then lend out. The balance sheet value stays the same but the assets the bank holds become liquid cash assets which can be lent out, the central bank gets the less liquid assets the bank owned in exchange. When this process of asset transformation happens the bank's cash reserves (cash funds) become excess reserves on top of the required reserves. The bank now has funds which it can lend out whilst maintaining its required reserve. When the new cash the bank holds is lent out it becomes loans which the bank holds on its balance sheet replacing the cash funds. You say there is another way of lending by falling below the required reserve and then correcting it after the loan is made. Even if this is allowed in the United Kingdom they seem to use upfront borrowing or open market operations to get the funds needed to make loans before the loan is made. This prevents the required reserve from being less than the legally permitted amount. I understand that banks do not want to hold excess reserves but they usually need them to make loans. I am not sure if the method you explain is legal in the United Kingdom because it falls below the legally required reserve, they tend to use OMOs instead. I have found another website link that explains the different types of reserves and their different functions. It seems to be along the lines of what I have explained although you state there is another way of temporarily falling below the required reserve to lend more money out without excess reserves. There is another link from the same website that explains bank runs in a similar way to my explanation. The literature available from articles, encyclopaedias and the organisations themselves seem to support my explanation. Bank Reserves. https://www.amosweb.com/cgi-bin/awb_nav.pl?s=wpd&c=dsp&k=bank+reserves Bank Runs. https://www.amosweb.com/cgi-bin/awb_nav.pl?s=wpd&c=dsp&k=bank run Anyway who cares the whole thing can be achieved through pension reform.
1. OK... Tells us M3 since 2007. The Fed only tells us when it wants to tell us. If they were audited why did Bloomberg have to sue them to find out how many trillions they gave out during the last mortgage crisis? 2. Printing Money... listen to Bernanke... 3. Recent massive money printing Over 6 trillion and counting to over 9 trillion created by the Fed without any legislation from congress back in april of this year. https://www.washingtonpost.com/business/2020/04/15/coronavirus-economy-6-trillion/ 4. You are the one seeming using sophistry with Morganist. Morganist provided you with textbook rules about how the reserve requirement works. It seems the reserve requirement must do something because some banks are still getting in trouble during a crisis. Instead of saying he was wrong... you should have been saying the requirement has been modified or eliminated for some banks but not others... (if that is the case) I am not an expert on banks... but I was an econ major and Morganist is giving you the textbook definitions. so I did a search. and this is the most recent item I could find coming from an authority on this subject.... https://www.newyorkfed.org/research/epr/02v08n1/0205benn/0205benn.html Background The Federal Reserve requires banks and other depository institutions to hold a minimum level of reserves against their liabilities. Currently, the marginal reserve requirement equals 10 percent of a bank's demand and checking deposits. Banks can meet this requirement with vault cash and with balances in their Federal Reserve accounts. Neither of these assets earns interest, however, so banks have an incentive to minimize their holdings. chart). In the most common form of sweeping, funds in bank customers' retail checking accounts are shifted overnight into savings accounts exempt from reserve requirements and then returned to customers' checking accounts the next business day. Largely as a result of this practice, today only 30 percent of banks are bound by a reserve balance requirement (chart).
No where in my discorse with you did I say that. Of course they can alter the reserve requirement. You're not having a language problem, your having a problem understanding the mechanism the U.S. Central Bank uses to target the wholesale price of money. The reserve requirement is a key element in that mechanism. In the U.S. the reserve accounts are also the accounts through which day to day banking transactions are cleared each night. These accounts, in the U.S., have little to do with a banks ability to lend other than in a trivial way. I mentioned that the central banks in some Countries, e.g. Canada, do not have reserve requirements. Do you think that those banks can therefore not lend. Of course not. It is clear to me that you have misunderstood the role of bank reserves in the U.S. Banking system, and likely therefore also in the British banking system, if in fact the British banks have a reserve requirement. I know only about U.S. Money and Banking. I know nothing of British banking other than what little I have read. It seems to me that you have confused a Bank's reserve requirement with its capital requirements, the latter relating the the quality of a bank's loans. Capital requirements are there to protect a Bank's financial integrity, whereas the reserve requirement is the means by which the fed regulates the price of money that the bank lends out. I don't have the time or inclination to teach banking and finance to you, and in any case I am not the one to do it. But detailed correct information is available. There are several good books I have in my library you purchase and read. I'll only mention one in particular, because it is cheap, widely available, clear, and it is, so far as I'm able to tell, correct except for a few minor quibbles I have. It is Warren Mosler's little paperback entitled "Soft Currency Economics II -- What Everyone Thinks they Know About Monetary Policy Is Wrong." Buy this book and read the second paragraph on Page 24. The paragraph that begins, "Bank managers generally neither know nor care about aggregate level of reserves in the Banking system. Bank lending decisions are affected by the price of reserves, not by reserve position. ..." You have consistently implied that banks build up reserves to lend, by selling assets, increasing deposits, or other ridiculous notions. Banks borrow reserves to lend out, but they do it contemporaneously with lending; Not in Advance! Why? Because traditionally central banks have not paid interest on excess reserves in order to discourage banks from holding excess reserves. That changed only in the last ten years with the advent of the financial crisis. Banks, via QE, found themselves with excess reserves and their was insufficient demand to lend out. The aggregate position remained in excess, which would cause the funds rate to be pinned at virtual zero, so the fed board of governors decided to pay a very small amount of interest on excess reserves to put a floor under the funds rate. But this rate is not sufficient to make banks borrow excess reserves in advance of lending. I don't know what the current reserve accounting period is, these things change -- it used to end on Wednesdays -- but typically, I think, banks have a day or two after the make a loan to borrow what the need to adjust their reserve. Let me summarize for the umpteenth time: Banks don't have to build up their reserves to lend more money, the amount they can lend is NOT limited by their current reserve position. Ordinarily, they simply borrow to lend and to adjust their reserves. What limits the loans they can make is their capital requirements; NOT their reserve position . The latter is always adjustable via interbank, fed funds borrowing and lending , or failing that, via the fed discount facility.
Jem, the only reason you buy into this conspiracy crap about the fed and think there is something sinister about the fed printing money is because you've never understood that the Government is the source of money, and our productivity and taxes are what gives it value. So of course the government "prints" money. Where else are they going to get it -- rob a Bank? You asked why Bloomberg sued. The answer is simple, they wanted the information now. They did not want to wait for release on the fed's schedule. And the fed did not want them to have it at that point, because the fed knows there are conspiracy lunatics such as yourself who have no clue. Some fed data is considerably delayed in its public release. (like Donald's tax returns.) Most of their bond buying and selling, however, is posted almost in real time with each individual issue and the amount identified. Ditto the Treasury. edit: Perhaps your not aware that government spending originates in the House; not at the Treasury, and not at the fed.
To avoid confusing yourself anymore then you already are, may I suggest you stop reading Investipedia. Read Warren Mosler's book instead.