These folks cannot say that the Fed’s QE unwind and higher rates might unwind some of the wealth of asset holders that resulted from the Fed’s desired “wealth effect.” That would be too clear. So they have to come up with hoary theories to back their “policy mistake” theme. This time it’s the theory of a “scarcity of bank reserves.”
For the crybabies on Wall Street, that’s “scarcity.” For savers, money-market investors, and short-term Treasury investors, however, it means the era of brutal interest rate repression has ended, and that they’re earning once again more than inflation on their money (savers might have to shop around).
