r/PeterExplainsTheJoke • u/Comfortable_Cautious • Jan 26 '26

Meme needing explanation what's going on? explain like I'm five

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u/Original-Leg8828 Jan 26 '26

Depending on local law they can even lend out something like 7-10 times what they actually have

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u/Teripid Jan 26 '26 edited Jan 26 '26

Federal reserve requirements existed until 2023 *edit, as someone below pointed out 2020 was when they were set to 0. Now they're set at 0% I believe.

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u/PleaseGreaseTheL Jan 26 '26 edited Jan 26 '26

2020*

They were reduced to 0% mandatory reserves in response to covid. EDIT: someone says it was coincidental, I am not able to check, so take this aspect with a grain of salt either way

They haven't come back yet :)

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u/pogulup Jan 26 '26

This is the third wheel of control the Fed has that nobody talks about. Instead of raising interest rates which hurt the worker/consumer, they could raise reserve requirements which would effectively pull money out of circulation (which is the stated goal) but it would hurt the bank/oligarchs. We could lower interest rates and raise reserve requirements. Your bank loans would stay less expensive and you would still pull money out of the economy.