Quantitative Easing has no effect. Because all the Fed is doing is adding money to it’s ‘checking account’:
A “reserve account” is just a fancy name for a checking account. And a U.S. Treasury bill, note, or bond is just a fancy name for the dollars on deposit in those securities accounts at the Fed. So when the Treasury spends, the Fed just adds the dollars to some bank’s ‘checking account’ at the Fed.
Great…except for the fact that the banking system uses these increases in reserves to increase the money supply.
ALL IS WELL!!!