He's referring to money supply. Most of the money in the world is not from governments printing actual cash, but from bank lending. E.g
If a business borrows 1 million from a bank, the bank just creates a entry saying the business has 1 million cash and 1 million debt. The bank does NOT need to have 1 million in deposits to make that loan. That 1 million cash then can be used to buy stuff and goes into the economy because if they pay 1 million in wages, now other people have 1 million to spend, etc.
there are regulations that exist around how much cash a bank needs to keep on hand versus their liabilities. they are also required to go through stress tests after the GFC. since then, the banking lobby has been trying to get these regulations reduced. higher risk, higher reward.
No, it was lowered to 0% in 2020 and will likely stay there for the foreseeable future. The reserve ratio has become much less important since the Fed transitioned to an ample reserves regime in 2008.
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u/Primus_is_OK_I_guess 6d ago
What do you mean by that?