New answers tagged banking
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Are bailouts destabilizing the global economy?
Are bailouts destabilizing the global economy?
Not necessarily. In fact in a short run they indisputably stabilize economy. That is I do not know any serious economist who would think that not ...
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2
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Accepted
Reserve ratio from H.8 report
In March 2020 reserve requirements were abolished (see Fed), so banks do not hold any mandatory reserves anymore.
Reserves were always included in these aggregate reports as part of cash. If you ...
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Do banks pay interest on the money they create?
Firstly, banks do pay interest on deposits. The rest is quite complicated in reality.
Your reasoning is based on the idea of a simple textbook example of fractional reserve banking: ...
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Bank runs, deposit guarantees, and moral hazard
Usually the government effectively guarantees 100% of deposits anyway when push comes to shove. For example, with SVB, the US government quickly came out with a statement that depositors will be made ...
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How would a Central Bank Digital Currency be different from a private bank deposit?
These could actually create significant changes compared to current system (e.g. see this the Economist article or more academic overview of this in Sinelnikova-Muryleva 2020, Panetta 2018 or Achord ...
- 50.2k
2
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Accepted
Money Creation Confusion
First, it is important to note that not all countries in the world have exactly the same monetary system. I will focus predominantly on how things work in US and EU. Other places might have some ...
- 50.2k
4
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Money Creation Confusion
@Mick probably offered the best answer by linking the BOE paper. I'll try to address your questions more directly.
Point 1)
It is an outdated and simplistic model. It assumes loans, which are ...
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Money Creation Confusion
There are a wide variety of things you can read that purport to explain our monetary system. It has been a controversial area. May I suggest you read the paper "Money Creation in the Modern ...
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Taking a loan to pay another loan with the same interest
If you pay back the outstanding debt on the first loan with a new loan (and there is no penalty for doing so), you do not pay interest or anything else for the first loan anymore. You paid your debt. ...
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