UUP - Quick Note On Interest On Reserves And Inflation Expectations
I've been working on the follow-up book to Shut Out. Some version of this graph will probably be in it. It shows that the deep drops in equity values didn't come from the disastrous September 2008 Fed meeting after the Lehman Brothers failure. They came during the period when the Fed began paying interest on reserves.
The story in a nutshell is that the Fed had the target interest rate pegged at 2%, which was far too high at the time. In order to maintain the peg, they would have had to sell every Treasury