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News Link • Economy - Economics USA

Can Bernanke Force Banks to Lend by Halting Interest on Excess Reserves?

• by Mike **QQ**Mish**QQ** Shedlock
Email Request From US
Hello Mish:
Have you listened to Mike Pento's scenario where the FED will cease to pay interest on reserves held at the FED, as a result, forcing banks to loan out the money to seek some return? He believes that they will be encourage to purchase US treasuries:
Is this viable and/or probable?
Thanks for providing us with such a great blog.
All the best,
Email From Down Under
Dear Mish,
I follow your work from Australia with great interest. I was impressed with your argument that the creation of new money will not lead to price increases because it is deposited with the Fed, and does not make it into the real economy.
You will no doubt be aware of recent comments by Michael Pento on King World News that the Fed is about to eliminate the incentives for the banks to deposit excess reserves with the Fed, and that this will force the banks to lend in the economy and cause significant inflation, and presumably a drop in the USD...

1 Comments in Response to

Comment by Joseph Vanderville
Entered on:

As Chairman of the US Federal Reserves, Bernanke CAN do anything under the law that which he MUST do. Under the law, the management of the national economy is, to the controlling authority -- the Feds -- a matter of judgment. Those who studied Medicine in order to become an "economic expert", and those noisy street economists from the "lunatic fringe" should keep out, so that he can do those things that he MUST do!

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