Bob flies solo to explain what he means when he tells crowds, “Back in the fall of 2008, as the financial crisis hit, the Fed began paying banks to not make loans to their customers.” Specifically, Bob explains the new Fed procedure of “paying interest on reserve balances.” As of the Fed’s December 2018 meeting, the Fed now pays the banks $40.8 billion on an annual basis–to not make loans to their customers.
Mentioned in the Episode and Other Links of Interest:
- The NY Fed’s official explanation of the interest on reserves program.
- “The Fed paid banks $30 billion in 2017” Business Insider article.
- David Stockman’s The Great Deformation.
- “Three Flawed Fed Exit Options,” a 2011 post from Bob showing how central bank painted itself into a corner.
- The Three Lads and the Lizard King, Bob’s book for his son.
The sound engineer for this episode was Chris Williams. Learn more about his work at ChrisWilliamsAudio.com.