The Fed Provides Reserves, Not on-Demand Inventory

In the system before, it kind of reminds me of the way we manage supply chains with on-demand inventory. And so in that environment, the Fed would maintain monetary policy by providing liquidity or providing reserves. Well, once we moved into the world of having excess reserves, posts, quantitative, you know, QE12 and three operation twists, so on and so forth, they also started paying interest on reserves. So I think what's happening today is something that we all have to come around to understand: The Federal Reserve could just pay interest at its overnight rate and do a great job.