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AAA21's avatar

I have a question: Agree that QE is NOT money printing. But what would happen if the Fed stopped paying Interest On Reserves (IOR)? Isn’t IOR the only thing keeping banks from doing “something” with the excess reserves to earn a return (ie make new loans, buy securities, etc)? Would that be inflationary?

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Lucas Vaneskeheian's avatar

Just got around to reading this, thanks Peter. We are facing a (kind of) similar situation in Argentina, where inflation has currently reached 100% YoY, and the CB has net income losses, reaching a point where increasing the benchmark rate only leads to higher inflation. Highly unlikely the US reaches that point though.

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