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Government Bond Sale Process Explained
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Government Bond Sale Process Explained
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| Government Bond Sale Process Explained |
So musical chairs.
I think, the reason, why those reserves are not needed, is because, the money, which the government spends, must show up onto regular bank accounts.
When the government prints bonds rather than lending from the central bank, it just prints another form of state money, which makes reserves obsolete.
And it also makes sense: banks don't need the central bank to create money, since they can do it themself. And since the money ends in their banks, they must create it anyway, because this is the only way to show up on private accounts.