Mrcauser’s Weblog

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Pooooor Mr. B…….

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Nothing but excuses from here on out. We are only creating part time and temporary jobs. Not good for banks.

Not good for anybody.

How the Bankers Have Trapped Bernanke by Gary North


The FED increased the monetary base by about $1.3 trillion in October 2008. This was the largest one-month increase in the history of the FED. Nothing else comes close. The FED was in panic mode. To double the monetary base in one month was hyperinflation.

But nothing much happened to the total money supply. That was because commercial bankers offset the purchase by depositing most of it into their accounts for excess reserves at the FED. The normal money multiplier effect of fractional reserve banking did not go into effect. The new money was mostly sterilized by the commercial banks.

The FED wanted this to happen. This was why, on October 6, it inaugurated a new policy: paying banks interest on excess reserves.

This policy had been scheduled to go into effect in 2011. It was speeded up because of the emergency.

Paying interest on excess reserves gave bankers a way to protect their funds without risk. For two weeks, the FED paid 0.75% on these reserves. Then this was dropped to 0.65% for two weeks, then increased to 1% for five weeks. Then it was cut to 0.25% on December 17,

Written by mrcauser

September 6, 2010 at 5:54 pm

Posted in Uncategorized

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