The base money confusion
By Izabella Kaminska
Peter Stella, Fromer head of the Central Banking and Monetary and Foreign Exchange Operations Divisions at the International Monetary Fund:
Naturally, this stunningly incorrect conceptualization of the lending process and how it interacts with bank reserves leads people to think how to entice banks to “get this money out the door” including to thoughts of “negative” deposit rates as an incentive.
My frustration lies in my inability to explain to “sophisticated” people why in a modern monetary system–fiat money, floating exchange rate world–there is absolutely no correlation between bank reserves and lending. And, more fundamentally, that banks do not lend “reserves”.
Daily Archives: July 3, 2012 @ 10:06 am (Tuesday)
China Official Services PMI Rises to 56.7 in June
The move to shift to a domestic demand driven service economy seems to be well underway?
China Official Services PMI Rises to 56.7 in June
July 2 (Reuters) — China’s official purchasing managers’ index (PMI) for the services sector rose t o 56.7 in June from May’s 55.2, reversing two months of softening readings, data from the National Bureau of Statistics showed on Tuesday.
The services sector index follows two PMI surveys of China’s vast manufacturing industry that showed factory activity fell to a seven-month low in June, raising expectations for further policy easing to boost growth in the world’s No 2 economy.
A reading below 50 indicates contracting activity and one above 50 means expansion according to the survey methodology.
The China Federation of Logistics and Purchasing conducts the survey on behalf of China’s National Bureau of Statistics.
China’s fast-growing services industry has so far weathered the global slowdown much better than the factory sector, with the PMI consistently signaling healthy expansion and hitting a 10-month high of 58.0 in March.