I do not think a shortage of bank reserves is a problem right now. CheckI need to update my Fed Balance Sheet series. Maybe I will get to it this weekend.
http://www.federalreserve.gov/releases/h41/Current/
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.
http://www.federalreserve.gov/newsevents/press/monetary/20081006a.htm
and
http://www.newyorkfed.org/markets/ior_faq.html
R Schenk
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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