State money and bank money: lifting the fog around QE

Ever since the Federal Reserve began to consider raising the federal funds rate, which eventually it did in December 2015, a cottage industry has grown around ‘taper talk’. Will the Fed raise rates or not? Each time a consensus congeals around the answer to that question, all the world's markets either soar or dive.

This obsession with taper talk – the interest rate story – is simple, but strange. Indeed, it is misguided – wrongheaded. So, why the obsession? It is, in part, the result of a

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