Comment by ArnoVW
1 year ago
interestingly, the Fed's page on Reserve Requirements states:
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.
So in effect, the multiplier is infinity.
https://www.federalreserve.gov/monetarypolicy/reservereq.htm
I remember this. Have they ever rolled it back?
The Basel Capital rules dominate at the moment. If that ever gets rolled back... buy gold immediately.
Oh ok. So there’s a difference between reserve requirements and capital requirements. Capital requirements are still in place Basel III (Basel Capital Rules) 4.5% among other requirements https://en.m.wikipedia.org/wiki/Basel_III
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not really infinity:
there are tons of balance-sheet-metrics which have to be aligned, in theory you are right; in practice, there are a lot differences.