Even When I Thought it Was Stimulation, I Knew it Was the Banks All Along
Arnold Kling tries to explain recent Fed policy actions re: injecting reserves into the economy and simultaneously paying banks interest on reserves to high school students, and comes to a sobering conclusion:
In spite of all the sophisticated rhetoric about "quantitative easing" and "new tools for monetary policy," the only way that I can understand what the Fed was doing is to say that the goal was to stimulate bank profits, not the economy. If your goal were to stimulate the economy, you would inject enough reserves to do that and not pay interest on reserves. That might require buying some long-term bonds or mortgage securities, but not the hundreds of billions that the Fed actually bought.
Everything the Fed has been doing over the past fifteen months makes sense if you think of their goal as transferring wealth from taxpayers to banks. If you try to explain it as an attempt to implement an expansionary monetary policy, you won't even get past my high school students.
My November Reason magazine feature on the new political war against the Federal Reserve.