Mish talking about IOR, interest on excess reserves. Is he using a savings and loan model or a savings,loan and seigniorage model?
Whether or not banks lend has nothing to do with interest on excess loans. Rather, the decision to pay interest on excess reserves is simply $22 billion in free money to banks every year, at taxpayer expense.If he says the IOR was at the taxpayers expense, then he uses the three input,output model. I can say with confidence, none, zilch of the total set of economists have an accurate understanding of the three way trade.
If the model is the standard savings and loan, then it makes sense. One member bank borrowed 2.4 T for the anti-gravity machine, and the other 30 member banks are betting even money on the project. That model is tractable, and the prediction of that model is simple, the anti-gravity machine is the sandbox, and the member bank with he 2.4T in debt is defaulting.