tag:blogger.com,1999:blog-5908830827135060852.post4019314348902720747..comments2024-03-01T02:40:14.946-05:00Comments on Bond Economics: Bank Reserves DemystifiedBrian Romanchukhttp://www.blogger.com/profile/02699198289421951151noreply@blogger.comBlogger8125tag:blogger.com,1999:blog-5908830827135060852.post-4386109703487635622022-09-22T09:45:00.857-04:002022-09-22T09:45:00.857-04:00You refused to read what I wrote, and just repeate...You refused to read what I wrote, and just repeated things that were covered by the article text. What am supposed to do, completely re-type my article in the comment section for the benefit of one person?Brian Romanchukhttps://www.blogger.com/profile/02699198289421951151noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-65807737662964432792022-09-21T11:58:54.131-04:002022-09-21T11:58:54.131-04:00"You are attempting to move the goalposts, an..."You are attempting to move the goalposts, and writing walls of text to act as a smokescreen"<br /><br />You claimed that banks do NOT need reserves in order to deal with depositors’ transfers elsewhere, and I'm claiming that they do, as far as real world evidence goes. I don't think this is tangencial issue, this is a big deal and core to the concepts with are trying to convey in this post.<br /><br />I'm also trying my best to write clearly and objectively.<br /><br />But I have realized that you are acting disrespectfully so I will not engage in discussions with you anymore. Your readers are not punchbags. If you are frustrated with something in your life, <br />don't take it out on me.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-71814053398290652042022-09-17T13:03:43.716-04:002022-09-17T13:03:43.716-04:00You are attempting to move the goalposts, and writ...You are attempting to move the goalposts, and writing walls of text to act as a smokescreen. A "bank reserve" is a *positive settlement balance* *held at the central bank* *at the end of the day*. In order for a bank to hold reserves, by definition, it has to hold them at the end of the day.<br /><br />And your example is utterly ridiculous. If a bank has a negative settlement balance intraday, it cannot be "holding" a settlement balance to meet future needs. <br /><br />You have just "proven" that banks want to receive inflows via the payments system. That is entirely obvious and tangential to the point I am discussing.Brian Romanchukhttps://www.blogger.com/profile/02699198289421951151noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-6244156632993742162022-09-16T21:38:53.212-04:002022-09-16T21:38:53.212-04:00There is the possibility that some banks operate w...There is the possibility that some banks operate without ever having settlement balances on their end of day balance sheet, but you are ignoring the settlement balances inflows and outflows that happen during the day. They do exist and are essential.<br /><br />In order to honor a customer's transfer request, the bank necessarily had a outflow of settlement balances. In order to reach a zeroed balance at the end of the day, the bank will need do to something to generate a cash inflow. Maybe it will sell government bonds or something.<br /><br />In conclusion, banks do need reserves in order to deal with depositors’ transfers elsewhere.<br /><br />To make a comparison, imagine a person that always has $0 at his bank account at the end of every month. If you are not attentive, you may assume that this person doesn't need money to pay for his living (buying food and rent etc). After all, the end of month balance is always at $0 and doesn't seem to be changing. However, if you look in more details, the person actually do need money to pay for his living. It's just that he receives just enough income to pay for his living and always reach a $0 balance at every end of month. Money is still necessary, otherwise he will starve.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-52848490113717862212022-09-16T07:09:00.147-04:002022-09-16T07:09:00.147-04:00If you actually read what I wrote, you would note ...If you actually read what I wrote, you would note that banks can operate without ever having settlement balances on their end of day balance sheet. Since those are literally the only balance sheets produced, you cannot point to me a situation where those banks hold reserves on their balance sheet. Brian Romanchukhttps://www.blogger.com/profile/02699198289421951151noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-49042655460521763512022-09-15T16:47:25.183-04:002022-09-15T16:47:25.183-04:00"Another issue I see is the belief that banks..."Another issue I see is the belief that banks need reserves in order to deal with depositors’ transfers elsewhere. In particular, this comes up in the context of extending loans — since loan amounts typically are used to buy things, banks allegedly need to hold bank reserves ahead of loan extensions."<br /><br />I could not understand your point. Banks do need reserves in order to deal with depositor's transfers elsewhere. Banks won't need reserves if a customer is transferring resources to another account at the same bank, but if the customer is transferring "elsewhere" (to another bank), the original bank will necessarily need to have the reserves to do that.<br /><br />Depending on the jurisdiction and on the bank and its balance sheet, they may not have access to overdrafts, which necessarily means that they do need to hold reserves before transferring.<br /><br />For those that do have access to intraday overdrafts, they indeed will not need to hold reserves before transferring, but they will need to hold the reserves by the end of the business day, which is not long before the transfer. This is a small technical detail that doesn't change the fact that reserves are needed in order to accommodate "transfers elsewhere", be it before the transfer is made or up to the end of the same day that the transfer is made.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-52845266731875555552022-09-07T14:27:53.855-04:002022-09-07T14:27:53.855-04:00This comment has been removed by a blog administrator.Osmanhttps://www.blogger.com/profile/04877609018763224830noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-5185193266737398462022-09-06T20:57:20.545-04:002022-09-06T20:57:20.545-04:00This is very clear, thanks. As you wryly note, it ...This is very clear, thanks. As you wryly note, it will take some time for what has already been happening to be acknowledged. If the time it has taken for the implications of the abandonment of Bretton Woods and the onset of soft currency economics to be acknowledged, I'd say a good 60 years ought to do it.eghttps://www.blogger.com/profile/00785993737401518690noreply@blogger.com