Thursday, November 6, 2008

A letter to the Teaching Economics Group

I just replied to a thread on the teaching economics mail group (
I do not think a shortage of bank reserves is a problem right now. Check

Reserve balances with the Federal Reserve are $493,633 million. That is up somewhat from a year ago. Well, a bit more than somewhat. It is up by $484,992 million.

The Fed has started to pay interest on reserve balances. I have not followed this very closely, but it seems the Fed wants the banks to hold excess reserves because it allows them to control the Fed funds rate better.

R Schenk
I need to update my Fed Balance Sheet series. Maybe I will get to it this weekend.

The stock market has had two days of large losses. I sure hope that is not because the market is worried about the economic policies of the president elect.

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