Great question. The answer is Modern Money Theory. "Monetary policy doesn’t work. What does work are fiscal adjustments" http://antonisoycasals.blogspot.com/20

Great question. The answer is Modern Money Theory. "Monetary policy doesn’t work. What does work are fiscal adjustments" http://antonisoycasals.blogspot.com/2015/10/monetary-policy-doesnt-work-what-does.html http://antonisoycasals.blogspot.com/2015/10/monetary-policy-... The truth is that monetary policy does little. QE just swapped out high-interest treasury securities for low-interest reserves on private bank balance sheets. This flood of reserves drove interest rates so far down that the Fed had to start paying interest-on-reserves just to maintain a floor. It didn't do much else. The idea that banks are reserve constrained is a widely held misconception. They are not. If anything, they are capital constrained. Adding to the supply of reserves then does not increase lending. Another widely held misconception is that interest rates and inflation are inversely correlated. They are not. Interest is the price of money, and the price of money impacts the prices of everything else. Lowering interest rates decreases inflation, not increases. This is called neo-Fisherism. Fiscal policy is what does work. Increase government spending enough and you will get inflation. This should be entirely noncontroversial.