Printing Money Without Causing Inflation: The 2.5 Trillion Dollar Question

Research Team

A new article about excess reserves is here: http://seekingalpha.com/article/3720496-printing-money-without-causing-inflation-the-2_5-trillion-dollar-question

The article is about how much of the money created via quantitave easing is still held at the Fed in excess reserves, and how rising interest rates may affect this.

Opening paragraphs:

At last count, there is more than $2.5 trillion in excess reserves held at the Federal Reserve. These are funds that are held by banks but are currently not being used in regular banking activities. This money could be lent as businesses loans, mortgages, personal loans, or any other lending activity in which banks partake, but is is not. It is simply sitting idle in accounts held with the Fed.

The Federal Reserve, in its role as a central bank, requires banks to hold part of their deposits on reserve within the Federal Reserve banking system. This is done to ensure the availability of liquid cash in times of need. The minimum portion of deposits that banks are required to hold is 10%. However, at current count, banks are holding a total of $2.5 trillion beyond the minimum requirements. This surge has been the highest level of excess reserves in history, having peaked at $2.7 trillion in August 2014.

entire article:http://seekingalpha.com/article/3720496-printing-money-without-causing-inflation-the-2_5-trillion-dollar-question

 

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