3

The operating procedures the Fed has followed has changed over the years. I will first discuss the situation pre-2008, and then discuss the current situation. Situation 1994-2008. The Fed has an interest rate target, and the amount of excess reserves in the system was typically very small. Under normal circumstances, the Fed controls the amount of ...


2

Typically foreign reserves will just be assets denominated in a foreign currency, most importantly government debt. Another popular reserve asset are IMF special drawing rights, which are convertible into currencies of member countries. I don't think there is any amount of physical cash currency in international reserves. You can see the makeup of US ...


2

"Vault cash" is the money that a bank will keep on premises (which is usually kept in their vault) to deal with their day-to-day cash needs. The bank must have a certain amount of cash on hand in order to deal with these types of every day transactions. "vault cash" is considered to be part of a bank's reserves, and banks will usually be required to have ...


2

As you point out excess reserves have indeed been going down since around 2014. The Federal Reserve doesn't force member banks to withdraw excess reserves, although the Fed can provide incentives to do so by lowering interest rates on those reserves. In other words, excess reserves have been going down because member banks have chosen to withdraw reserves ...


2

From what I saw, the video confused various forms of monetary instruments. If a customer gets a \$1000 transfer from the Federal Reserve, Bank A has a \$1000 deposit liability, and a new \$1000 balance at the Federal Reserve. Under the assumption that the bank was at its reserve limit, it has \$900 in excess reserves. It can eliminate those excess reserves ...


2

Examine this statement: If you want a gold standard, it's easier to set bank's reserve requirement to 100%. The only sense in which this is true is that it eliminates fractional reserve lending. However, a key defining characteristic of the gold standard is that government-issued money can be converted into gold upon demand. This creates a real ...


1

Yes with reserve requirement of $0.03\%$ the maximum amount of money that can be created will be given by $\frac{100}{0.03} = {\\\$}3333.33$, with ${\\\$} 100$ reserves and ${\\\$}3233.33$ new money. Yes if everyone repays the ${\\\$}3233.33$ and there is still demand for loans bank can lend it again. To be clear the ${\\\$}3233.33$ will not become new ...


1

I believe that the Fed is more focused on saving the US economy from collapsing because of the effects of the coronavirus situation. When the Fed wants to loosen monetary policy and increase liquidity, it lowers the reserve requirements ratio which will make lending cheaper. Lowering the reserve requirement increases the amount of money that banks have ...


1

There was a time when they did, but it's a less common tool of monetary policy now. At any rate, altering the minimum reserve ratio at this point would be pointless due to the huge quantities of excess reserves banks have been holding since the 2008 bailouts and subsequent rounds of quantitative easing. The reserve ratio is a relevant tool of monetary policy ...


Only top voted, non community-wiki answers of a minimum length are eligible