> How does your model explain that reserve requirements are now 0%?
> Why haven’t the banks created infinite money?
Reserve requirements are not the only constraint limiting bank’s ability to lend. The banks are also limited by the number of qualified borrowers who are seeking a loan. Qualified borrowers must have sufficient collatoral and/or income coverage to service the loan as well as a need to borrow funds. Banks can’t sell more loans than qualified borrowers are buying.
> Why haven’t the banks created infinite money?
Reserve requirements are not the only constraint limiting bank’s ability to lend. The banks are also limited by the number of qualified borrowers who are seeking a loan. Qualified borrowers must have sufficient collatoral and/or income coverage to service the loan as well as a need to borrow funds. Banks can’t sell more loans than qualified borrowers are buying.