Letters to the Editor
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The "money multiplier" doesn't work if the banks don't lend
As the Fed "prints" money primarily by buying securities from banks, if those banks don't lend the money doesn't go anywhere. The general rule is those banks will lend all the money (while reserving capital against whatever portion of the loan they are required to) and the money goes out into the economy, comes back to the bank and is loaned again with a reserve, and so forth. But for the lending to actually occur, banks have to think it is in their best interest to make loans. Otherwise they'll just put it in treasuries or something safe, which doesn't necessarily do much for the economy except support the government's ability to borrow.
So the Fed may have to start dropping money from helicopters after all.