Comment: SO I brought up FRB because

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SO I brought up FRB because

SO I brought up FRB because the idea that bank "loan out funds" is a common fallacy of that idea.

Banks can loan out the QE money to other banks, this is true. But they cannot loan it out to individuals and businesses.

When banks give out loans, they simply create money from thin air. Poof. They will only give out loans to credit-worthy customers.

Reserves, like the money that is added in QE, can be used by the banks to maintain regulatory and liquidity requirements. Historically, the banks have expanded credit at an incredibly rapid pace, with only a few billion in reserves.

Basically, banks weren't not giving out loans because they didn't have the money, they weren't giving out loans because

1) Their balance sheets were in a mess
and
2) They couldn't find (enough) credit-worthy customers.

Now, it is true, that as the $$$ of credit is increased, banks will need more reserves. Why? Because as their obligations grow, they will need a little more in reserves to meet demand payments. However, as we can see empirically, large increases in overall credit only marginally increase the liquidity needs of banks, causing a very small increase in reserve levels.

QE didn't work because QE did not solve those base problems. The Federal Reserve took assets from the banks, and replaced them with another type of asset. The first asset paid interest; the replacement assay did not. The overall +/- of the balance sheets did not change; just the composition.

I didn't mean to come off as hostile :)....

Plan for eliminating the national debt in 10-20 years:

Overview: http://rolexian.wordpress.com/2010/09/12/my-plan-for-reducin...

Specific cuts; defense spending: http://rolexian.wordpress.com/2011/01/03/more-detailed-look-a