[qnt]

> The financial institutions are not hoarding the money the Fed prints and gives to them. They are using it to make mortgage and commercial real estate loans, because that is what they are allowed to use it for under current policies.

Again I think there’s a misunderstanding of monetary operations that lead to these conclusions. Banks absolutely do just sit on these reserves [1]. Banks do not lend reserves, nor do they need reserves or deposits in order to make new loans. Bank lending is constrained by the demand from creditworthy borrowers, and regulatory requirements. This [2] is a useful primer on modern lending mechanics

[1]: https://fred.stlouisfed.org/series/TOTRESNS

[2]: https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...

[pdonis]

> Banks absolutely do just sit on these reserves

They have been to a much larger extent since the 2008 crash, yes. But not before that, as the graph you reference shows. What I am saying is by no means limited to the time after 2008.

> Banks do not lend reserves

There is a minimum reserve requirement, but for virtually all banks it is minimal--3% last I checked.

> nor do they need reserves or deposits in order to make new loans

They absolutely do depend on central bank policy, precisely as your second reference says: "The amount of money created in the economy ultimately depends on the monetary policy of the central bank."

What your reference is describing is not in any way inconsistent with what I said. It is simply describing the details of how the process works. Yes, the official line is that the banks create money by making loans. But how much money they are allowed to create this way is determined by central bank policy.

Also, the very fact that banks can create money this way, whereas you and I can't, is government favoritism of the banking system. In a sane economy, banks creating money out of thin air by making loans would be illegal, since it would be considered as what it is: counterfeiting money. But in our insane economy, this practice (fractional reserve banking with maturity transformation) is considered completely normal: notice how your second reference treats the idea that banks would only lend out money that is given to them as deposits as a quaint old-fashioned misconception, instead of obvious common sense.