Comments by "Maria" (@maria8809ttt) on "Interest rates should be as low as possible" video.
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The BoE
'The bank therefore creates it's own funding, deposits, in the act of lending, in transactions that involve no intermediation whatsoever....
The fact that banks technically face no limits to increasing the stock of loans and deposits instantaneously and discontinuously.
Keynes called it fountain pen money, nowadays it usually involves tapping some numbers into a computer and creates brand new money 'out of thin air', which it then deposits into the borrower's account. In other words, instead of deposits leading to loans, it actually works the opposite way. It is the loans that lead to newly created deposits. Banks worry about their reserve positions after the fact. Reserves are only required to ensure all the cross bank transactions on any day will be reconciled.
Only if it has insufficient reserves does the commercial bank turn to the central bank, which is obliged to provide reserves on demand.
Pre existing deposits aren't even touched, or needed for that matter.
The money supply is endogenously demand driven and largely controlled by private banks, not central banks.
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'The Delors plan constructed counter-stabilisation policy purely in terms of central banks adjusting interest rates to maintain price stability, with an independent central bank being the macroeconomic policy institution deemed necessary at the federal level. This starkly contradicted basic Keynesian theory, and represented a triumph of Bundesbank-style monetary discipline-and a victory for Germany. The Delors Report essentially acted as a blueprint for the constitution of the EMU in the coming years. The report's outline became, with few modifications, the very text of the Treaty of Maastricht's provisions for the progression towards EMU. On 23rd January 1972, the governor of the Danish Central bank, Frede Sunesen, wrote in the Financial Times:
'I will begin to believe in European economic and monetary union when someone explains how you control nine horses that are all running at different speeds within the same harness.'
What eventually allowed the 'nine horses' to be harnessed together into the monetary union was not a diminution in Franco-German rivalry, but a growing homogenisation of the economic debate. The surge in monetarist thought within macroeconomics in the 1970s-first within the academy, then in policymaking and central banking domains - quickly morphed into an insular groupthink, which trapped policymakers in the thrall of the self-regulated free market myth. The accompanying confirmation bias overwhelmed the debate about monetary integration.'
Professor William Mitchell. One of the world's leading heterodox macro economists.
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