A handy-dandy quick reference–minor edits and emphases added by me.
â€œThe Fed controls the money supplyâ€: No it does not, it sets an interest rate (what happens after that is up to firms and households and their desire for external funds).
â€œThe Fed injects reserves which lowers the interest rateâ€ or, worse offender, â€œThe Fed injects money which lowers interest rateâ€. Under normal circumstances (i.e. pre-Great Recession, which is what most people have in mind when saying this), the Fed does not proactively inject reserves, it waits for banks to ask. And, the Fedâ€™s monetary policy never injects money, i.e. never deals directly with the public (M1).
â€œThe Fed printed money during the financial crisisâ€: No it just credited accounts by keystroking amounts, no Federal Reserve notes were printed. More to the point, none of these funds entered the money supply, i.e. funds held by the public.
â€œThe Fed used taxpayersâ€™ money during the financial crisisâ€: No it just credited accounts of banks by keystroking dollar amounts.
â€œBanks use reserves to buy stocks and corporate bondsâ€: No banks canâ€™t do that with reserves.
â€œThe large inflow of reserves in banks did not lead to inflation because banks did not lend the reserves or based on reservesâ€: No banks operate that way, bank credit and amount of reserves are unrelated (upcoming posts on this).
â€œCentral banks lend reservesâ€: No the Fed does not lend reserves because reserves are its liability.
â€œFiscal deficits raise interest ratesâ€: No, there was a hint about this in a previous post. More is coming in the next post. (short: fiscal deficits increase productivity instead, up to full employment–zap)