QE and Excess Reserves

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#1 Sun, Jun 30, 2013 - 4:02am
Joined: Jul 21, 2011

QE and Excess Reserves

At what rate have excess reserves at the Fed been increasing since QE#?

If they are increasing at 40billion a month, then that would be just the MBS component being left by financial institutions at the Fed gaining 1.5% interest for the bank and not circulating in the economy.

If it is increasing at 85billion a month, then that would be both the MBS and Treasuries sitting there.

Excess Reserves of Depository Institutions (EXCRESNS)

2013-05: 1,863.345 Billions of Dollars Hide Last 5 Observations
2013-04: 1,768.834
2013-03: 1,698.154
2013-02: 1,616.788
2013-01: 1,519.460

Equals 86billion a month increase in excess reserves, so are the USGovernment just letting the dollars created sit as excess reserves? 

If the point of QE is not only to keep interest rates low but also to fund the USGovernment deficit, well why is the money (apparently) just sitting there in excess reserves and not being used/spent?

Am I misunderstanding this data? Please explain.

Secondary question, where does the money paid by the Fed as interest on excess reserves come from?

Edited by: grinners on Nov 8, 2014 - 5:01am
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