Friday, October 10, 2008

Signs of the End Times

Dear Freakwenter,

It has been reported that U.S. Adjusted Reserves are up 768.1% compounded annually since July 30. Is this a good or a bad thing for me?

Dear Astute Observer,

Banks usually lend out most of their deposits to make money. The reserves are the part of deposits that are not out on loan. The data you found shows that the amount of money in banks that is not out on loan nearly doubled in the last few days for which we have data, in mid-September.

This means that either someone suddenly put about $70 billion in the banks (perhaps by selling stocks), and the banks have not had time to lend it out, or it means that banks aren't making loans anymore, or both.

Is this a good thing for you? I'd say it depends on whether you are the person who put $70 billion in the bank or the person who is trying to get a loan.

-The Freakwenter


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