Saturday, March 01, 2008

Money in the bank??

The current H3 report from the Federal Reserve shows the Feb 27 shows

42,939 million in total reserves

- -17,295 million in "non-borrowed" reserves… (subtract the negative amount)..


60,234 is the amount borrowed - almost exactly the amount in the term auction credit

This means that banks have borrowed (60234 / 42939 ) of their reserves…

In other words the current reserves held by the banks are %140 borrowed money!

Now the purpose of reserves is to keep banks honest, and to make sure they can pay you when you want some of your money back.

I could be wrong.. but this seems to imply that for every dollar in the bank you have... they've borrowed 14 cents to keep even with the 10 cents they are supposed to have.

Am I the only one who thinks that's a problem?

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