Comment by JumpCrisscross
14 hours ago
> There is no such thing as fractional reserve banking
Yes, there is. We just changed how we measure the fraction from a crude one like a reserve requirement (which takes zero account of asset quality or funding source) to finer and more-robust ones like capital and liquidity reqirements.
Banks still have to hold reserves. And those required reserves constrain their lending and thus the amount of money they can create. The limits just aren't the old-school reserve requirement.
They don’t constrain the quantity of lending. They only change the price.
Liability side controls don’t work.
> They don’t constrain the quantity of lending. They only change the price
Which country's capital and liquidity requirements are you thinking of?
Because Basel III dictates ratios. These are hard limits on lending.
Loans create deposits, deposits are used to buy bank capital issued by banks.
There’s no hard limits. They are ratios which are preprepared because a bank knows how big its sales pipeline is and that takes time to complete.
Nothing is limited in quantity. Even the silly SLR they have in the US is a pricing limit, not a quantity - as we see every time somebody moans about how much the deficit has gone up.