Bank Reserve Trends of Major English Speaking Countries.

In Money Supply on May 18, 2011 by CQCA

After the start of this financial crisis, U.S. bank reserves began to rise dramatically. The exact numbers were discussed in a previous post. Another post looked at Canada’s bank reserves, specifically.

The above chart shows the bank reserve trends of five major English speaking countries. The data was taken from each country’s central bank and indexed to January, 2007. Australian and U.S. bank reserves both increased by 100% between August, 2008 and September, 2008. Australian bank reserves increased to a factor of 23.86 (above the January, 2007 level) by December, 2008. They then decreased to pre-crisis levels by mid-2009.

Canadian bank reserves then spiked from an indexed rate of 1.09 in January, 2009 to an indexed rate of 40.46 by June of the same year. In other words, the amount of money held in Canadian bank reserves multiplied by a factor of 40 in six months. In less than a year and a half, Canadian bank reserves had gone from low to low in the chart shown above.

U.K. bank reserves were the next to spike up. They have remained almost level since that time.

New Zealand’s bank reserves only reached a high indexed point of 1.23 in November, 2008. In March, 2011, bank reserves were 27% lower than in January, 2007.

U.S. bank reserves are the only bank reserves to be at a higher rate now than at any time during the crisis.

Much of these reserves came from bank bailouts, also known as printed money. As this money gets loaned out, it then multiplies on itself. This process has already begin in Canada and Australia, but has not really yet begun in the U.S. or the U.K. If U.S. bank reserves remain in reserves, U.S. deposits will be the safest in the world. More likely, though, is that this money will eventually make it into the money supply and cause the money supply to expand at an uncontrollable rate.

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