If this doesn’t make you deeply question the state of economics then I don’t know what will….

If this doesn’t make you deeply question the state of economics then I don’t know what will….

“But as the economy recovers, banks should find more opportunities to lend out their reserves.”

   –  Ben Bernanke, Former Fed Chairman, 2009

“Commercial banks are required to hold reserves equal to a share of their checkable deposits. Since reserves in excess of the required amount did not earn any interest from the Fed before 2008, commercial banks had an incentive to lend to households and businesses until the resulting growth of deposits used up all of those excess reserves.”

   – Martin Feldstein, Harvard Economics Professor, 2013

– “[The Fed knows] that if there is an opportunity cost from these massive reserves they’ve injected into the system, we are going to have a hyperinflation.”

   – Nobel Prize Winner Eugene Fama on why the Fed is paying interest on Reserves, 2012

“the Fed is paying the banks interest not to lend out the money, but to hold it within the Fed in what are called excess reserves.”

   – Laurence Kotlikoff, Boston University Economics Professor, 2013

“Notice that “excess reserves” are historically very close to zero. This reflects the tendency (assumed in textbook discussions of “open market operations”) for commercial banks to quickly lend out any reserves they have, over and above their legally required minimum.”

   –  Robert Murphy, Mises Institute, 2011

“In normal times, banks don’t want excess reserves, which yield them no profit. So they quickly lend out any idle funds they receive. “

   –  Alan Blinder, Princeton University Economics Professor, 2009

“given sufficient time, [banks] will make enough new loans until they are once again reserve constrained. The expansion of money, given an increase in the monetary base, is inevitable, and will ultimately result in higher inflation and interest rates.”

   –  Art Laffer, Former Reagan Economic Advisor, 2009

“First of all, any individual bank does, in fact, have to lend out the money it receives in deposits. Bank loan officers can’t just issue checks out of thin air”

   –  Paul Krugman, Nobel Prize Winner & Princeton University Economics Professor, 2012

“Ohanian points out that the Fed has done a lot already, having increased bank reserves from $40 billion to $900 billion. But this liquidity injection was not what it seems — indeed, if it was, we’d now have hyperinflation. In reality, the Fed completely neutralized the injection by starting a new policy of paying interest on reserves, causing banks to simply hoard these “excess reserves,” instead of lending them out. The money never made it out into the economy, so it did not stimulate demand.”

  –  Scott Sumner, 2009

This isn’t some minor flaw in the model. It’s the equivalent of our foremost experts in automobiles thinking that, if we pour gasoline into cup holders, that this will allow our cars to move forward. If this doesn’t make you deeply question the state of economics then I don’t know what will….


About Kristjan

Defitsiidi terrorismi vastase pataljoni eriüksuslane (finantsignorantsuse vastu võitlemise osakond). Treening: MMT, postkeinsism, Tartu Ülikool Majandusteadus
Rubriigid: Estonian. Salvesta püsiviide oma järjehoidjasse.

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