Reply To: Inflation: What's holding the dam together?


Major banks currently have significant excess reserves where, traditionally, they have practically 0 as you can see. (See also this, which charts both excess reserves and the increase in the monetary base – they practically mirror each other).

Given the nature of fractional reserve banking, if/when the banks decide to put these excess reserves into the economy, well, watch out.

The question then becomes: why have they held onto excess reserves? What is the purpose of having so much excess reserves?