... the time bomb of excess reserves may explode if inflation increases, warns Auerbach, a former economist with the House of Representatives Financial Services Committee and the U.S. Treasury's Office of Domestic Monetary Affairs.

"If short-term interest rates rise above 3 percent, the Fed may have to pay perhaps 3 percent interest on excess reserves to keep the time bomb from exploding into the economy as the banks invest in more lucrative income earning assets." Much of that money, he predicts, would go to their stockholders due to lack of competition in the concentrated banking sector. ''

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