Talk:Reserve requirement

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[edit] Merge with Reserve ratio

Looks like the two terms are describing the same thing. If you agree, what title should the article take - reserve ratio or reserve requirements? --nirvana2013 18:59, 12 February 2006 (UTC)

They are not quite the same. Reserve requirements is a more general term. These requirements are typically expressed as a ratio, however there are several ratios involved in the reserve requirements of most countries. I agree that the two articles could be merged, but both titles should be maintained in the navigation system. mydogategodshat 02:31, 13 February 2006 (UTC)

[edit] Liquidity ratio?

I was searching liquidity ratio and redirected here. This is not right at all as this ratio I know is about accouting and has nothing to do with bank. Anyone keen to start this article? --203.118.189.122 04:07, 4 October 2006 (UTC)


[edit] Money "Creation"

All attracted funds are subject to recerves (current accounts, savings accounts and time deposits etc...) only some hybrid derivatives are excluded. —Preceding unsigned comment added by 213.91.217.55 (talk) 11:53, 17 April 2008 (UTC)

I changed: Thus, higher reserve requirements should result in reduced money creation and, in turn, in reduced economic activity.

To: Thus, higher reserve requirements should result in reduced M2[1] and, in turn, in reduced economic activity. This process does not "create" money per se, because all deposits and loans are accounted for with a series of debits and credits. M0[2] remains unchanged. —Preceding unsigned comment added by 72.190.4.18 (talk • contribs)

This is incorrect. M2 covers savings accounts which are not subject to reserve requirements. Also, this process does create money, to the extent that transaction deposits are money. I am reverting your change - Crosbiesmith 22:21, 11 July 2007 (UTC)

Money is NOT created. You are wrong, sir. An equal amount of money owed is lent. Using words such as "create" are extremely deceptive.

Read this part, sir:
"If the reserve requirement is 10%, for example, a bank that receives a $100 cash deposit can lend up to $90 of that deposit, keeping only a $10 cash deposit within the bank. If the borrower then writes a check to someone who deposited the $90, the bank receiving that deposit can lend out $81. As this fractional-reserve banking process continues, the banks can expand the initial deposit of $100 into a maximum of $1,000 of money ($100+$90+81+$72.90+...=$1,000). "
$900 is created, under this scenario. It exists as long as this new money is either deposited or circulating. Circulating, you ask? Well, this will happen after deposit: a payee deposits the check from the borrower so that it can be spent - but loans backed by all these deposits are still outstanding, even after depositors withdraw the money. So, again, as long as it's either deposited or circulating, there exists $1000 where before there was only the original depositor's $100. The paying back of all the loans eliminates the money again, but, since loan paybacks free the bank to re-lend against the deposits again, it's more or less perpetual, until policies drive banks to reduce the lending (higher ratio) or drive borrowers to reduce the borrowing (increased loan expenses [interest]). Please read more at Money creation. 198.49.180.254 23:06, 29 October 2007 (UTC)

The description of money creation is misleading. Banks don't make loans from their reserves. The comment above about banks not creating money is incorrect. Banks do create new money. See the following document from the Federal Reserve Bank of Chicago for a more detailed description: http://landru.i-link-2.net/monques/mmm2.html —Preceding unsigned comment added by 203.118.155.104 (talk) 04:40, 30 January 2008 (UTC)