Man there's a lot of problems in those responses. For one, where's the inflation supposed to come from? Demand-pull inflation is an incredibly muted phenomenon in modern countries, because, let's face it, we built industry for war, and that fact doesn't change in peacetime. But then, the fact that supply-pull inflation has happened seems to have made everyone forget that involuntary unemployment (in the absence of resource shortages) is an indicator of insufficient demand. Like "war is good for the economy" because of the limitless demand, but during peacetime, aggregate demand is always right at the knife's edge of inflation. Second, lending is constrained primarily by demand for loans, which (a fact that should be a surprise to nobody) means that the interbank rate is the constraint. While the interbank rate can be (but doesn't have to be) controlled by system-wide reserve quantity, that doesn't mean that more reserves will somehow magically push the nominal interbank rate below zero, nor does it mean that a 0% rate with way way too many reserves will somehow lead to more lending than a 0% rate with way too many reserves. And of course QE doesn't and can't directly affect deposits. Third, banks and investors hold T-bills and -bonds as a risk-free income source, not as a favor to the government. There are no "bond vigilantes," and that's how it has to be. If the T-bill rate were above the interbank rate, then banks would prefer to hold bonds over reserves, and the subsequent trading would raise the interbank rate. Hence, the Fed has to control the T-bill rate in order to enforce its policy rate. Since the Fed by definition has infinite money, while any wannabe bond vigilantes have finite amounts of money, well... Fourth, there is no sovereign bond crisis in the US, England, or Japan. There is a crisis in Europe, because euro-denominated sovereign bonds are not risk-free, hence the above paragraph does not apply. Bonds from currency-issuing governments are risk-free because if push comes to shove they can always be redeemed for new cash, which in turn negates the need to actually do that. Institutional arrangements aren't particularly important to this: while the Fed issues base money, if there were actual risk of default on US treasuries, the Fed would intervene, or Congress would make them. Fifth, the liquidity of the reserve system is only important if liquidity management is the tool that's used to maintain the policy rate, and then it's only important if an above-zero rate is desired. If we come to that point, there's nothing stopping the Fed from selling back the assets it bought as part of QE. And banks will buy them, because above-zero yield is preferable to zero yield. All that being said, increasing aggregate demand through fiscal policy is the way to escape the current crisis. That's unlikely to be inflationary in the foreseeable future, though.