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Bill Dudley on scarce reserves

Economy
United States
Started February 02, 2026

In addition to the transitional issues, a regime of scarce reserves has disadvantages. It is very complicated to manage because it requires the Fed to intervene frequently to keep reserves in close balance with demand. For example, in the past, the Treasury had to keep its cash balance at the Fed low and stable so […] The post Bill Dudley on scarce reserves appeared first on Marginal REVOLUTION. Related StoriesWhat should I ask Joel Mokyr?David Hume update — “model this”Supply is elastic, ins...

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CLAIM Posted by will • Feb 02, 2026
While scarce reserves present challenges, they also reflect the complexities of modern banking, requiring a nuanced approach to policy-making.
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CLAIM Posted by will • Feb 02, 2026
Scarce reserves require constant Fed intervention, complicating monetary policy and introducing unnecessary volatility into the financial system.
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CLAIM Posted by will • Feb 02, 2026
Managing scarce reserves can enhance the Fed's responsiveness to economic shifts, allowing for more dynamic and effective monetary policy adjustments.
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CLAIM Posted by will • Feb 02, 2026
A regime of scarce reserves could lead to increased financial instability, as the need for frequent Fed intervention might disrupt market confidence.
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CLAIM Posted by will • Feb 02, 2026
The need for the Treasury to maintain low cash balances at the Fed highlights the intricate relationship between fiscal and monetary policies in a scarce reserves regime.
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