The Fed created this problem. Yet he wonders why. It’s reasons like this that cause people like Ron Paul to think the Fed is dangerous - they don’t understand

The Fed created this problem. Yet he wonders why. It’s reasons like this that cause people like Ron Paul to think the Fed is dangerous - they don’t understand their own creations. Kocherlakota doesn’t understand it either. The repo market explanation is simple: the IOER rate is higher than fed funds, but with the Fed reducing their balance sheet (QT) by $800 billion, there are going to be unusual effects. This is one of them.