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> (email exchange)
> Yesterday I was rereading Ben Bernankeâ€™s Wall Street Journal piece of July 21 2009.
> I noticed that the Krugman words quoted in your blog (â€œThe banks donâ€™t need to sell
> securitized debt to make loans â€” they could start lending out of all those excess
> reserves they currently hold. â€) were the same as Bernankeâ€™s (â€™But as the economy
> recovers, banks should find more opportunities to lend out their reserves.â€™).
> Why would Bernanke say this? Since when do banks need to lend out of reserves?
They don’t. In fact, at the macro level they can’t. Lending does not ‘use up’ reserves.
Both Krugman and Bernanke unfortunately don’t seem to fully understand monetary operations.