Jeffrey Hummel has an interesting piece on the Federal Reserve paying interest on excess reserves and its unintended consequences (ht Tyler Cowen):
So again, the accumulation of excess reserves may reflect the perverse impact of central banks paying interest on them... I predict that future economic historians will look back on this change as a major blunder during the current credit tightening, making traditional monetary policy less effective.
If this policy turns out to be a major blunder, future economic historians will probably compare it to the one the Fed made in 1936-1937.
