I have heard this, and I believe it, but if taken at face value, it would mean that some bank could, right now, simply poof 100 trillion trillion trillion dollars into existence, and then start giving it to random people. If the people who control the money-poof-button at some bank were to do this, would there be any way to stop them? Or would they somehow not be able to in the first place?
The reason the fed lowered the reserve amount to zero is because it was no longer a real barrier to lending. Since 2008 US banks had amassed something like 4 trillion in liquid capital and were lending at the same or reduced rates. There was also a currency shock due to the pandemic. The search term is “ample reserves regime”.
The fed still has other requirements for use of their facilities and every bank that lends money is covered by a wide swath of regulators that have their own asset to liability and loan makeup requirements.
Sooner or later part of these 100 trillion trillion dollars will be withdrawn from the originating bank and deposited with other banks. The originating bank will have to send reserves to these other banks, and if it can't because it doesn't have enough reserves, the bank will fail.
But the reason most countries no longer have reserve ratios is because these ratios have been replaced with capital requirements, which likewise constrain bank lending activity. Apparently some people didn't get the memo though, and think banks are now unregulated and can do whatever they want. In reality the banking sector is one of the most regulated industries, and for a good reason.
I believe that change is the cover story to prevent a cascading bank failure. We made it illegal to go to work for a year, we were at a serious risk of a deflationary spiral and the fed did a LOT to flood the economy with dollars. That appears to be one of them.
Similarly, if you go look at the M1 money supply chart you see that vertical line. The average person goes "WTH!!" and they are told "The vertical line is where we changed how the M1 is calculated" and the average person goes back to sleep. But even a middle schooler knows you can't just arbitrarily change how the Y axis is calculated mid-stream. It makes the chart useless. They could have back-filled with the new way of calculating or forward-calculated with the old way for some period of time. The chart is useless on purpose. It's friction between an average viewer and understanding what happened in the economy. And only "weirdos" and "conspiracy theorists" bother to overcome the friction to try to figure out what goes on.
