<i>&gt; Most of that cash stayed in reserve at banks (see &#x27;Repeat After Me: Banks Cannot And Do Not &quot;Lend Out&quot; Reserves&#x27;).</i><p>This is a very misleading use of terminology. It is true that banks can&#x27;t lend out &quot;reserves&quot;, if by &quot;reserves&quot; you mean the 3% reserve that banks in the &quot;upper reserve tranche&quot; at the Fed (which is basically any bank you&#x27;ve ever heard of) have to keep in their accounts at the Fed and not lend out.<p>But the actual balances of those banks at the Fed are far in excess of that 3% reserve requirement; they are being kept in &quot;reserve&quot; by the banks not because the Fed requires them to but because the banks choose not to lend it out. Why would they do that? They aren&#x27;t saying, at least not publicly, but the obvious hypothesis is that it&#x27;s because their expected rate of return from lending it is lower than the rate of interest the Fed pays on their balances. In other words, they are worried about borrowers defaulting and driving the banks into insolvency and then bankruptcy, and the government refusing to bail them out because it wouldn&#x27;t be politically acceptable this time around.<p>So the reason inflation has been so low is that most of the several trillion dollars the Fed has printed in the last few years has never actually been put into circulation. (The doublespeak about &quot;collapse of the money multiplier&quot; is just a roundabout way of saying the same thing.) Which says nothing at all about what would happen if that amount of money <i>were</i> put into circulation, as it certainly would be if printed money was used to fund a basic income program instead of &quot;quantitative easing&quot;.