Has Bernanke Been Reading the Free Bankers?!
I am working on a Mises Daily article discussing the recent Fed announcement. I was going through old FOMC statements to see if they had hinted at this.
In the midst of this research I came across the following line, from Ben Bernanke’s February 2010 testimony to the Committee on Financial Services. It is the last sentence in the last footnote to the prepared remarks:
The Federal Reserve believes it is possible that, ultimately, its operating framework will allow the elimination of minimum reserve requirements, which impose costs and distortions on the banking system.
Those pesky reserve requirements, distorting the ability to create new money at will!
(BTW, I know the Austrian “free bankers” do not endorse the existence of a central bank. Some bloggers boost traffic by showing pictures of scantily clad women; others gain mystique by writing in haiku. I choose to pick fights with Steve Horwitz. It’s all good.)
Neither Canada nor Australia have reserve requirements. Brazil, on the other hand, has a 43% reserve requirement (according to wikipedia).
Quite apart from what constitutes an ideal free banking environment, in a central banking environment, the extent of moral hazard in the financial system probably plays a role in the need for reserve requirements.
“Some bloggers boost traffic by showing pictures of scantily clad women; others gain mystique by writing in haiku. I choose to pick fights with Steve Horwitz. ”
I’m not sure, of those three options, that that’s the best choice.