Posted: May 17, 2013 1:51 am
by GT2211
First I would like to say I am glad to see the GOP/corporate think tank AEI finally acknowledge that the GOP inflation fears are wrong distracting from the debate we should be having on how to grow the economy. Unfortunately the AEI still seems to not grasp the mechanics of monetary policy which indicates there is more work to be done.

Now Steve Roth has wrote a very helpful and wonkish post at AngryBear explaining that:
a) The Fed is creating reserves which should not be confused with printing money or you are going to get very confused results
b) Reserves are not 'money sitting on the sideline'
c) Reserve levels have ZERO correlation with inflation rates.

Image ... erves.html