/biz/ - Business & Finance

>>29343441
>>29344512
Forgot to mention that THIS is the real brrr money. But for every dollar increase in this, a dollar decrease occurred in the form of a bond security or MBS, so it nets out. Perhaps the most fun fact is that banks earn 0.1% interest on these meme reserves, paid for by US taxpayercucks.

>>27209174
Back to your point.
Despite reserve requirements being 0%, commercial banks are holding the highest balance of reserves of all times. This is probably because M2 is also super high and they have to backstop runs on deposits, but what about the other reason?

>Commercial banks earn 0.1% interest on their reserve balances. This adds up to about $30+ BILLION per year, every year, since 2016.
>The interest is paid for by the US Taxpayercucks. It counts as a budget expense of the US government...

People will try to tell you (why I don't know): "but anon, the Fed remits $50 billion back to the Treasury every year from the interest it earns on its bond holdings.

Fantastic, but who pays the interest on the bonds?
>US Taxpayercucks
We give the Fed $80 billion every year and get $50 back. In plain sight!

>>26118273
There was a good research paper (looking for source now) about how commercial banks these days are all making way more money from asset appreciation then they are from loan interest spreads. You also have to notice how the direct benefactors of QE are the commercial banks that sell the treasuries and MBS to the Fed, and in return receive reserve balances that earn 0.1% interest (paid for by the US Taxpayercucks).

At the same time, those commercial banks are so stacked with cash equivalents, when assets take a dip or get liquidated (including real estate) they will be the only ones with enough capital to have a shopping spree and basically buy everything at a yuge discount.

>>25228634
The TLDR of this should be that commercial banks can and do invest their funds (reserve balances AND earned capital) in all classes of assets. The rules get even fuzzier when including permissible investments of subsidiaries of Comm banks... So the money DOES get into the real economy.
>Reserves are so high because they can't be used for anything else
1st, Banks get gibs on their reserve balances. I think its 0.1% right now. The interest is paid for by us... kind of a blackpill.
Total cost of the US taxpayer for interest on reserves
>2016 = $15 billion
>2017 = $30 billion
>2018 = $35 billion
>2019 = $39 billion
This is risk free to banks.

2nd reason is because M2 is so high and banks are thinking they probably need to actually have reserves to meet potential demand deposit withdrawals. Will post M2 chart next...

>>25228341
The TLDR of this should be that commercial banks can and do invest their funds (reserve balances AND earned capital) in all classes of assets. The rules get even fuzzier when including permissible investments of subsidiaries of Comm banks... So the money DOES get into the real economy.

>>25220222
Checked but pic is retarded on many points
>Banks need to keep a certain % of cash on hand by federal law
Reserve requirement has been 0% int he US since March and 0% in most western countries for years. Its not relevant to inter-bank lending so points about after hours monitoring and killing the overnight market are dead too.

>Banks are constantly spending your deposits on various financial instruments
Did the deep dives on this and no. They can invest deposits into 5 types of debt securities (CFR Title 12), they can't invest it into equities (National Bank Act), in their own accounts they can allocate $ to all kinds of shit including gold (12 CFR) and cash settled derivatives (OCC #949) using the money they make from ops: which comes from net interest income or investing their own capital.

>expect the Federal Treasury to step in and bail them out
kek, what is this. The Fed? The Treasury? lowest IQ part right here.

>offer up cash on the taxpayer's dime
To be clear, QE swaps reserves for treasuries, $ for $ value, on par. "bailing out" is just trading one asset for a more liquid asset and lowering the rates in the process. Other liquidity injections by the Fed are loaned, not given.

>WHY aren't other banks lending to each other
most obviously its interest they earn on reserve balances (real black pill)
and they each own a large enough share over the interbank payment network not to give a fuck.