I came upon a fascinating discussion of the ambiguities in the word "reserve" as commonly used in discussions of banking. Okay, the word "fascinating" is subjective, perhaps especially in that context. Still, this is from a fellow calling himself Dwain Dibley, about whom I know nothing else, commenting in a thread to a post about US monetary policy in Mises.com, a blog on Austrian economics. --------------- Reserves' is one of those ambiguous Fed doublespeek terms that has different meanings and or functions, dependant upon the context in which it is being used. So let's cover some of what the Fed considers 'reserves'. 1) Reserves are: Cash held in bank vaults. 2) Reserves are: Bank assets held on deposit at the Fed. 3) Reserves are: Assets purchased by the Fed in its open market operations. 4) Reserves are: The liquidity provided by #2 and #3 in the interbank settlements system. When the Fed talks about adjusting bank reserves, it'...
