Interest on Reserves: History and Rationale, Complications and Risks

 

Article from the CATO libertarian moron people here…

This whole thing was from Art Degree douche Milton Friedman doing the whole figurative “bond vigilante!” thing:

George Tolley (1957) and Milton Friedman (1960) first argued that since bank reserves can be created at zero marginal cost within a fiat money regime, economic efficiency dictates that the opportunity cost to banks of holding reserves should be driven to zero as well. Tolley and Friedman also pointed out that one way to satisfy this efficiency condition is for the central bank to pay interest on required reserves at a rate approximating those available on other safe and highly liquid short‐​term assets, such as United States Treasury bills. Based largely on this economic efficiency argument, it seems, the Financial Services Regulatory Relief Act of 2006 granted the Federal Reserve authority to begin paying interest on bank reserves,

Thank that dead guy for any current risk asset price stabilization…