The Solanum continually tells us that banks don’t lend out deposits, they don’t in fact need deposits at all. They just invent the money they lend anyway.
The problem with this is that we’ve real world evidence that this isn’t so:
First Republic Bank’s deposits fell by over $100 bn in the first quarter and it said it was exploring options including restructuring its balance sheet, overshadowing market-beating profit and sending its shares down 21% after the bell on Monday.
If deposits are’t needed, if deposits don’t matter, then why would an erosion of the deposit base matter? Ah, but it does matter – therefore there’s some need to deposits and MMT be damned – along with the Solanum.
So, a Q for any silly enough to believe the wilder MMT claims. If banks don’t need deposits then why is a falling deposit base a problem for First Republic?