The Fed's Troubles With Interest on Reserves

When the bailouts first begin in the wake of the global financial crisis, you actually have a doubling of the balance sheet. The Fed essentially did was double that monetary base and then proceeded to continue increasing it with various forms of quantitative easing. What happens after the government spends that trillion dollars? Well, the government's going to spend it on goods and services in the real economy. That's where you get that crowding out effect where a government activity supplants private activity.