I’m not quite sure what you mean by this, particularly “crediting liabilities.” I would have said the bank creates a new liability on itself (for example, by increasing the amount in the borrower’s account) while simultaneously adding an asset to its own balance sheet (the discounted value of the loan).
I agree that whenever cash leaves the banking system, that reduces the amount of dollars in Federal Reserve accounts, on a dollar-for-dollar basis. I’d argue, though, that it’s bank customers who decide how much cash to hold in the form of Federal Reserve Notes, not banks, and that that decision doesn’t have much to do with borrowing. (In fact, it’d be strange for someone to borrow money in order to hold it as currency.)
But you’re right, increases in the amount of currency circulating decreases the amount of reserves in reserve accounts. They are both, of course, just different forms of liabilities on the Fed, and the Fed can always increase reserve account balances if it thinks too many people are holding cash.
You’re right. Of course, the Fed also increased Reserve account balances by a much larger amount, over the same period.
No, I’m saying of the Fed wants the amount of Reserves to be $X, then that’s the amount it will be. It manipulates the amount by buying selling its assets - Treasuries, or other securities. It can do that despite the fact that people hold some Fed liabilities as currency, and despite the fact the amount they hold as currency changes from week to week and month to month.
I appreciate the gratuitous insult, but if you think dollar liabilities and assets are not evenly matched, I’d be pleased to hear the explanation.