- A Few Things the Fed Has Done Right (The Grumpy Economist)
- A Few Things the Fed Has Done Right (WSJ)
Reserves that pay market interest are not inflationary. Period. Now that banks have trillions more reserves than they need to satisfy regulations or service their deposits, banks don't care if they hold another dollar of interest-paying reserves or another dollar of Treasurys. They are perfect substitutes at the margin.
- Monetary Policy with Interest on Reserves (John H. Cochrane Homepage)
Interest-paying reserves are not inflationary. The money multiplier, the link between open market operations and lending, and velocity will all become meaningless.