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More Evidence that Banks Create Credit Out of Thin Air
Posted By admin On March 17, 2010 @ 5:19 am In Money Watch | Comments Disabled
Washington’s Blog 
March 17, 2010
I’ve just found two more pieces of evidence:
(1)William C. Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York, said  in a speech last July:
Based on how monetary policy has been conducted for several decades, banks have always had the ability to expand credit whenever they like. They don’t need a pile of “dry tinder” in the form of excess reserves to do so. That is because the Federal Reserve has committed itself to supply sufficient reserves to keep the fed funds rate at its target. If banks want to expand credit and that drives up the demand for reserves, the Fed automatically meets that demand in its conduct of monetary policy. In terms of the ability to expand credit rapidly, it makes no difference
(2) On February 10th, Ben Bernanke proposed  the elimination of all reserve requirements:
The Federal Reserve believes it is possible that, ultimately, its operating framework will allow the elimination of minimum reserve requirements, which impose costs and distortions on the banking system.
Of course, Bernanke’s proposal is the exact opposite of the 100% reserve system proposed by Nobel prize winning economist Milton Friedman and Laurence Kotlikoff, former Senior Economist for the President’s Council of Economic Advisers.
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URLs in this post:
 Washington’s Blog: http://www.washingtonsblog.com/2010/03/more-evidence-that-banks-create-credit.html
 provided: http://www.washingtonsblog.com/2010/03/7-questions-about-public-banking.html
 said: http://www.newyorkfed.org/newsevents/speeches/2009/dud090729.html
 proposed: http://www.federalreserve.gov/newsevents/testimony/bernanke20100210a.htm#fn9
 proposed by : http://en.wikipedia.org/wiki/Full-reserve_banking#Debate_over_full_reserve
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