The textbook I’m reading says that the reserve ratio is like the biggest “tool” that the fed has. They are increasing interest rates, but then they are having the reserve ratio at 0% and they are engaging in reverse repo to make sure that banks have plenty of cash. I don’t get it.
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Because the banks don’t need bank reserves to lend anymore so it’s meaningless. All of them have learned their Lehman Brothers and Bear Sterns lesson.
The 1950s view of fractional reserve is outdated and is hardly used anymore. Banks use repo (not RRP with the fed) between themselves these days to buy and sell money in wholesale fashion.
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