““Indeed, if $50 trillion printed tomorrow sat as excess reserves (the most likely event), it would have the same effect as if it was buried in the ground, or not printed at all. Such is the nature of a credit-based economy, and a point that has caused hugely inaccurate inflation forecasts from many Austrian economists.””
Wait… isn’t this not necessarily true? Wouldn’t there be something of a crowding out effect? Reserve requirements have changed, but there were required reserves before. So, if a bank formerly had $20 million in reserves, and then the requirement is raised so that it needs $30 million, all of which is supplied to them from the federal reserve, the original $20 million is now freed up to be lent out and shuffled through the economy, yes?
In other words, if the Fed gives banks any funds that exceed the amount of new funds needed to meet a higher reserve requirement, all of those funds will end up NOT just sitting in a vault, but being spent. Am I wrong here?