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December 17, 2012 at 11:45 pm
#17451
Member
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?