I just saw this. It is spot on.
An excerpt:
Banks are lending the Fed about $3 trillion worth of reserves, reserves the banks could go out and lend elsewhere if the market were producing great opportunities. Spreads of other rates over the rates banks lend to or borrow from the Fed are very low, not very high. Deposits are flooding in to banks, not loans out of banks.
If you just look out the window, our economy looks a lot more like one in which the Fed is keeping rates high, by sucking deposits out of the economy and paying banks more than they can get elsewhere; not pushing rates down, by lending a lot to banks at rates lower than they can get elsewhere.
I thought it had been well-settled that it's what the Fed does with reserves and about reserves and about the monetary mechanism that matters, not what it does about interest rates. As Scott Sumner often says, "Never reason from a price change", and that's what people do when they look at the Fed and the overnight lending rate.
Maybe the rate announced by the Fed has some "announcement effect" but probably not much given everything else it does that is nowhere near so expansionary as too many financial writers think it is.
What the Fed has been doing since 2008 seems eerily similar to what the Fed did in the 1930s when it "soaked up the excess reserves" and put the economy back into a tailspin. It doesn't seem so bad this time around (thankfully) but it could be so much better.