Follow The Money, page-787

Millibuster,

Basically, it all  boils down to this: Martin Feldstein claims to have solved the puzzle of why Quantitative Easing has not resulted in higher inflation.

The usual suspects, yes the inflationists and liquidationists, and some  others have been searching for explanations for the puzzle of the century - why there has not been inflation. And they found it on   the Fed's payment  of .25% on excess bank  reserves, which transforms money printing into no-money printing. After all,   according to them money printing is inflation and therefore if there is no inflation then it must be  because there has been no money printing. Do you folow the logic.  Use links bellow.

From Krugman,

"Noah Smith has a nice takedown of Martin Feldstein’s latest, which is the claim that the reason a vast expansion of the Fed’s balance sheet has produced no inflationary effect at all is the 0.25 percent — that’s right, 0.25 percent — rate of interest the Fed is paying on excess reserves.

Even if this were right, wouldn’t it suggest that the Fed’s expansion poses no inflationary risk? I mean, if all that alleged pressure can be completely contained with a 1/4 percent interest rate, how big a problem can it be?

But it’s not right, as Noah shows logically; and of course the example of Japan, which did massive QE without paying interest on reserves, and saw nothing happen, reinforces the point.

The remarkable thing is the desperation with which inflationistas keep conjuring up new explanations for a result –the failure of large increases in the monetary base to have an inflationary impact — that was fully predicted, in advance, by simple economic models. Instead of saying that a simple IS-LM framework, or a New Keynesian analysis along the same general lines, has worked very well — and that whatever other model they were using failed the test — they keep coming up with excuses."

By the way , the simple IS-LM framework says that in a liquidity trap situation you can print money without anything happening." It has be around for an enormous amount of time, but it is still object of some polemic for the reasons  specified in here.

http://krugman.blogs.nytimes.com/2011/10/09/is-lmentary/