Why dont banks just buy m0?

Under fractional reserve banking everything comes from m0. Therefore banks could just buy m0 repeatedly and create infinite money. What stops this? Is it a specific law or just procedural things like the government blocking cash deposits to prevent inflation from destroying the world?

uhh wut? No.

M0 is a measurement of the value of physical hard currency in circulation. It has almost nothing to do with the concept of fractional reserve banking. From whom do you think these banks are going to “buy” this money from, and in exchange for what?

Literally anyone and with fractional reserve money.

This is incoherent.

I have a feeling you’re starting from very, very wrong premises and attempting to ask something that makes no sense based on conclusions you’ve drawn from mistaken information.

Try to take a step back and figure out exactly what it is you’re trying to ask, and what information you’re trying to get. Then ask that.

Yes, what friedo said. If I’m understanding the OP correctly, the question is why banks don’t get rich by buying money.

This is 1/2 of how bank make money. The other half is selling money for less than they pay for it. Selling money is called making loans. Buying money is paying interest on deposits.

Because m0 allows them to create 10x or whatever m1 loans. This is obvious to anyone who understands the concept of fractional reserves.

Paying interest on deposits is not buying m0. Except perhaps in an indirect and minor way.

Its a simple question, no way to make it simpler. If you dont understand the concept of fractional reserves then maybe do some reading.

That’s good advice.

Since you’re not actually interested in a factual answer to your incoherent blathering, I will happily fuck off and get back to my life here in reality, where words mean things.

Well I mean I guess we dont have anyone here with econ 101 who can answer the question. So I will go fuck a goat until one of those people shows up.

The only answer i can imagine is desperate and technical.

  1. There is a few months delay between a cash withdrawal and the mint replenishing money.

  2. Only the net change in cash is paid. Any deposits crowd out other deposits that would happen anyway.

  3. Therefore open market operations are the only way to introduce money

Without #1 there would be infinite money supply growth because withdrawals would clear faster than deposits leading to measurement error.


Actually, several have. I agree that you need to do some more basic reading, and come back when you have a better understanding of the subject. You’ll also need to be less snarky to people who are trying to help you. In the meantime, I’m closing this.

General Questions Moderator