THAT NEW RESERVE REQUIREMENT THAT ISN’T A RESERVE REQUIREMENT

THAT NEW RESERVE REQUIREMENT THAT ISN’T A RESERVE REQUIREMENT

While we're all sitting around contemplating our dwindling stocks of toilet paper and hand sanitizer, you might have noticed that there's an awful lot of financial finagling going on, or at least, indicators thereof (like German state finance ministers taking a stroll in front of a high speed train), or markets moving to all-electronic trading, or like this classic from The Federal Reserve (story courtesy of E.E., and C.A.F.):

Fictional Reserve Lending Is the New Official Policy

Now, the old joke used to be that the Federal Reserve was neither really federal nor really a reserve, and this little statement proves the latter, and that there's no lack of a sense of humor (or should that be, a sense of humours) at the Fed:

With little fanfare or media coverage, the Fed made this Announcement on Reserves.

As announced on March 15, 2020, the Board reduced reserve requirement ratios to zero percent effective March 26, 2020. This action eliminated reserve requirements for all depository institutions.

Really?!?

I mean...really!?!?!?

Now, as the article goes on to explain in terms that you and I remember learning in elementary school (for those of us old enough to remember when America had real schools that taught real subjects back in the good old days of boys' and girls' toilets) how the fractional reserve system was supposed to work:

Amusingly, a few days ago yet another article appeared explaining how the Money Multiplier works. The example goes like this: Someone deposits $10,000 and a bank lends out $9,000 and then the $9,000 gets redeposited and 90% of the gets lent out and so an and so forth.

The notion was potty. That is not remotely close to how loans get made. Deposits and reserves never played into lending decisions.

The notion of the "reserve" was simply there, like Jimmy Stewart in It's a Wonderful Life to provide a little cash cushion for depositors who might want real cash; it wasn't there to backstop a bank run, for as Jimmy pointed out to angry customers demanding their deposits, they were all lent out.

But by taking the reserve requirement to zero, what happens. Well, once again, if you grew up at a time when they were steal teaching real mathematics in American schools, rather than teaching that mathematics was yet another preserve of "white male privilege" in need of "reform," you might recall that when the denominator in a fraction becomes zero, the resultant quotient is infinity.  Translated into "banksterese", that means that an infinite amount of money can be loaned out by... well, just about anyone calling themselves a bank. As the author of the article aptly puts it: "The only thing that's new is the official announcement that reserves are fictional."

And what does that mean?

Guess who is going to unload as much questionable junk as possible and guess who will buy it.

Banks know they have losses but hey will not admit them.

All it takes to mask them is a clever swap takes the assets off the balance sheet of the banks and temporarily hides them on the balance sheet of the Fed.

What About New Lending?

Hiding junk is not new lending. It is not new production. And it is not new hiring.

To achieve real growth we need new production, not hiding of losses.(Emphasis added)

Or as former German Finance Minister Wolfgang Schauble - who so far has managed to avoid walking on railroad tracks at inconvenient times - put it, the debt finance model is over. There's no way forward that is not a reform. Or as former Assistant Secretary of Housing and Urban Development Catherine Fitts has put it: we need real equity capitalism, not the fake capitalism of "finance capitalism."

See you on the flip side...

 

 

 

19 thoughts on “THAT NEW RESERVE REQUIREMENT THAT ISN’T A RESERVE REQUIREMENT”

  1. Robert Barricklow

    By the bye, haven’t seen Goshawks post sins 4/2.
    Miss your informative commentaries.
    Hope all is well.

  2. Was the nation just Federalised?
    “symphony of death in concert” ala Mickey Mouse fantasia, when Disney went bad.

    Reading through the bible from ‘in the beginning’ , I feel there is a need for updates on swindles (with G_d on your side)…

    And Jo Jo Scabitt convinced the Egyptian king to print out on paper something that represented a year of harvest and keep this locked in Jo’s safebox for a famine year…. and Jo hypothecated said notes selling them to the people in return for real wheat and barley and myrhh. When the famine came and the people asked Jo for their wheat in return for their paper, Jo sadly announced that the plague of locusts had eaten it all, but that he and his blood relatives, including his wife, had wisely stored some other wheat which was available for the mere cost of the people’s first born,to be offered as a sacrifice to the Lord, with a pleasant smell and no coronavirus loss of smell for Him indeed.
    perhaps an update to the NT with a single M95 mask , glove, and goggle put into baskets and turned into 7 billion a day through a miracle. PPE will set you free.

  3. anakephalaiosis

    There are three propositions:

    1. The endless nothingness of empty void.
    2. The endless derivatives of delusions.
    3. The closed system of cycle.

    Breaking the sixth seal, and the seventh seal, covers the first two. Whereas the spin of sundial covers the third.

    There is a reason, why vampires have a frenetic fear of the spinning cross. Because it is the basic construction of the sundial, in Genesis.

    Vertical perpendicular makes a stand, to be the axis of spin, in the roulette.

    1. anakephalaiosis

      To be axis of spin, one rides Odin’s tide trotter, that has 8 legs, 16 knees, and 32 toes.

      To make a stand, one erects a perpendicular, from standing stone.

      To kill a vampire, one drives it through, with a wooden perpendicular.

      Spiritual light casts no shadow in Kairos, the center of sundial.

      1. anakephalaiosis

        BOLTED SYNAPSE

        When god of thunder came around,
        there was a breaking sound,
        of head skull crush
        in brain mush,
        because wit was not found.

  4. Agreed, we need new financial system, enough of vampirism and endless free cash for privileged. And for god sake, we need production everywhere not just in China, high tech countries cant make toilet paper and masks … thats just pathetic.

  5. The banks and corporates helped by the governments are now ruling and buying the world with trillions and all kind of swaps lines
    They do not need reserves because
    we, the people are becoming their byproduct their reserve their future cash flow
    as long as we take on their debts and are productive.
    I cannot imagine when the AI and the robots will just replace us on a large scale and at that point, what kind of productivity the populations will have to offer
    already the eldery are useless eaters and apparently, they are the principal casualties of this coronavirus !
    We will become even more Too Many “Useless Eaters” Dr. Kissinger?
    https://ukiahcommunityblog.wordpress.com/2013/05/31/james-lee-too-many-useless-eaters-dr-kissinger/
    the FED the banks and corporates taking over
    https://traderschoice.net/about-traders-choice/

  6. marcos toledo

    If you own a bank you embezzle the money if you use a bank to rob your, investors, you swindle them. But what do call it when you are doing both crimes at once and the crime is interlocked.

  7. If you can get a hold of Bill Still’ masterful documentary on the Federal Reserve called “The Money Masters” all will become very clear.

    1. Robert Barricklow

      I remember emailing that to many friends and posting it in reviews. Many people were suddenly awakening to a new frame of looking at events.

  8. I suspect the ‘zeros reserves’ shenanigan is to open-up the coffers for the acquiring of physical assets. It is obvious that the financial world is going off the tracks. To be a winner in these circumstances, the key is to buy-up the means of production (physical assets) with near-worthless money. Exchanging the virtual for the physical.

    The zeroing of reserves allows a great ‘pulse’ of credit out into the market. Ultimately, this will translate into inflation, as more money is chasing the same amount of assets. However, if one is a ‘first mover’ such as BlackRock or Vanguard, one can borrow huge amounts at virtually zero interest to buy-out factories, manufacturing assets, etc.

    Then, when hyperinflation kicks-in, you have no money lying-around becoming more worthless by the day. Instead, you have physical assets escalating at the same rate as inflation. However, your fixed-amount debts can be paid-off with cheaper and cheaper money via inflation.

    The overall situation can be viewed as an adult version of Musical Chairs , where someone is going to lose regardless. However, one side has a few seconds of notice as to when the music is going to end…

  9. According to pharma / vaccine history I read in Dissolving Illusions Suzanne Humphries, pharma was attacking Euro and America with vaccines horrifically before and during both WW1 and WW2 at about oh approximately the same time as the banksters were attacking all those folk. And then it all stopped quietly with no announcement right after WW2.

    Seems to have started up again. And just reached its peak?

    1. Robert Barricklow

      Now I like that implied concept
      linking the two as brothers in arm against humanity;
      as it has a solid ring of truth to it.

      1. Robert Barricklow

        Should have written: linking “them”;
        as they are clearly orchestrating
        the symphony of death in concert.

  10. Robert Barricklow

    AH!
    The Magick of reserve currency.

    I remember being real pissed off when I read The Creature from Jekyll Island. I passed the book around, and they all said/it was the bankers!

    You can’t divide by zero; unless you use bankster Magick.
    Back to liar loans; this time from the FED. This in honor of April 30th’s Big Lie/as Hitler didn’t die/suicide in the bunker.

    What is required as the real capital. Trust.
    And that is not nearing infinity; but nearing a real BIG explosion!

    Problem, reaction, virus.

  11. Reminds me of Bill Black’s book “The Best Way to Rob a Bank is to Own One”. Haha! Too bad Obama had no use for Black in 2008. But then, he must have been in on the swindle.

    The Best Way to Rob a Bank Is to Own One
    How Corporate Executives and Politicians Looted the S&L Industry, Updated Edition
    By William K. Black

    Now updated with an extensive afterword that reveals how the bank failures of 2008 resulted from the lack of regulatory oversight discussed in this book, here is the acclaimed insider’s account of how financial super predators brought down an industry by massive accounting fraud.
    January 2014
    This is a print-on-demand title. Expedited shipping is not available.
    https://utpress.utexas.edu/books/blab2p

  12. Okay so if a bank that has no cash on hand for their ATM machines flashes the “out of cash” message they are no longer insolvent, just out of cash? Their balance sheet is strictly electronic therefore the depositors’ is too.
    No cash on hand means debit or credit cards only as an medium of exchange. Gradually no paper specie is to be available or accepted. ATM machines will be replaced or modified to reload chipped debit cards…stock up on stock of companies that make ATM machines.
    Anyone have any Diebold stock they want to unload?

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