>>"This coupled with fractional reserve banking means that the banks can make a whole lot more loans, flooding the system with liquidity so that money can start

>>"This coupled with fractional reserve banking means that the banks can make a whole lot more loans, flooding the system with liquidity so that money can start moving again." That's not how it works. First, never mind how much money banks can lend, if there is nobody asking for credit. You can't create demand for credit by QE. Second, private banks are not limited in their capacity for creating credit by the quantity of reserves available. If central banks are going to keep their interest rate target they have to facilitate any demand of reserves by private banks. It's impossible for a Central Bank to control the quantity of money and the interest rate, they have to choose one, and they choose the interest rate. As I said in another post, I was totally confused about how it works until I started to read the Modern Money Theory version of all this. Here, explained by the Bank of England (pdf): https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy.pdf https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...