How To Instantly Fix Bank Liquidity
Eliminate the zero percent reserve requirement, which has encouraged risky bank behavior and moral hazard. Force the banking system to hold back something in reserves.
U.S. banks are carrying hundreds of billions of unrealized losses as a result of aggressive buying of debt securities when rates were at zero percent back in 2020 and 2021. Further, aggressive lending during the zero interest rate period, even today, has allowed the money supply to explode, thereby greatly reducing Dollar purchasing power as measured versus gold.
Getting the reserve requirement back above 10% would help return the U.S. commercial banking system to normalcy. However, it will not happen. This Fed and the past three or four Presidential Administrations want the money supply to explode.
The Fiscal and Monetary policy responses to this next recession will be fascinating. It is just a question of how big the economic bailout will be. Guess what will happen to the Dollar? I will tell you. A dozen eggs is going to $20 when the next print cycle, QE cycle and stimulus check cycle begins. This can only end one way - significantly higher prices.
