You have failed to understand the relationship between short term interest rates and excess reserves. In doing so, you will not be able to understand the zero-interest-rate environment.
Nope. I fully understand how the Fed uses open market operations to influence reserves. It has nothing to do with anything I said. Let's go to the record.
I said...
Not really. We could require higher fractional reserves and the lender of last resort is more effective in keeping a bank solvent.
You said...
This is essentially the caveman nonsense the Bank of China employes with their policy. Required reserves are irrelevant in a zero interest rate environment.
Again, since you don't seem to understand what the Fed does, open market operations are not the only means of increasing reserves. The Fed can simply increase the reserve requirement. That's what I said to start with. Are you denying that the Fed has the power to increase reserve requirements?
Nope! I said that reserve requirements were irrelevant in a zero-interest-rate environment. Because you lack a financial understanding, i am not the least bit surprised!!!
Already, went over this one. Nobody said a GD thing about zero interest environment. That's just your dishonest strawman.
If you seriously believe that by advocating the opposite of a zero interest rate environment you have refuted anything that i said, you are completely out of tune with reality. As the Fed funds rate approaches zero, excess reserves will increase in an exponential fashion. If this does occur, excess reserves > required reserves (far greater) which is an alternate measure of the Fed funds overnight rate.
First I am advocating a zero interest rate environment now I am advocating the opposite? I still have said nothing about interest rates, other than to acknowledge their use in open market operations.
Which is why you fail. There is no understanding of monetary policy on your behalf.
I understand it fine and no amount of dishonesty on your part is going to change that. You can spin all you want dude, but you are arguing a strawman.
Which further illustrates your ignorance! If you raise reserve requirements, you necessarily increase the Fed funds target rate because banks will be more hesitant to lend out any excess reserves in the Fed funds market.
Uhhh, so what! This was never about interest rates.
A bank failure occurs when they cannot borrow (in the short term market) to meet any-and-all short term liabilities.
A bank run occurs when a bank does not have the vault cash/reserves to meet the demands of depositors. There is a big difference. Your inability to understand it proves my point.
Therefore, you have zero business in this discussion.
So you, finally, return to the debate, but don't actually add anything. If you want to pretend the bank failures you listed are significantly different than a bank failure due to a run on the bank, be my guest. There is virtually no difference at all.
Banks fail because they do not have the reserves, whether they borrow it or not, to meet depositor's demands. It does not matter if it is because their depositor's finally wake up to their insolvency, the FDIC does or the bank finally admits it.
