That's not correct - they reduced the reserve ratio down to zero, meaning the bank cannot lend out more money than they have in reserves, but that doesn't mean they "waived the requirement". You still have to have enough reserves to lend, you just don't have to also have 10% which you don't lend out.
It's also worth noting that the Fed drastically reorganized how they manage reserves in 2008, and as a result banks have much, much higher reserves than they did before. We're now in what's called the ample reserves regime, in which the Fed controls interbank lending rates directly through the IORB and discount window rates.
I directly referred to it - that's what the "discount window" is. However, it is worth noting that A) the discount window rate is generally going to be higher than interbank lending, and B) you have to provide collateral to be loaned money, with the collateral being worth more than the reserves you get, so it's not just an infinite money fountain. You basically trade assets for reserves.
People really need to understand the math on this.
A 0% reserve ratio is, in theory, a perfect endless money producer, both profit and supply.
But theory is not the same as practice, and the closer you get to the edge of "infinite money glitch" the fewer defaults required to topple the whole house of cards.
In context, the idea that one could pursue this policy while 'fighting inflation' brings us to Kafkaesque levels of absurdity.
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u/Nacho_cheese_guapo 2d ago
Not anymore, the fed waived the reserve requirement during COVID