[dragonwriter]

> QE and ZIRP are deflationary policies

No, they are inflationary policies; fear of deflation was one of the factors motivating them.

> because they reduce the amount of interest payments (which are no different

That's...mostly irrelevant. Yes, government interest payments would be inflationary because some of them go back into the domestic economy, but flooding the domestic economy with money through loose monetary policy is not net deflationary; the reduction in money pumped into the economy in interest payments is far less than the amount of money that is pumped into the economy to effect that reduction.

[dools]

QE simply swaps one form of government liability (treasuries) for another (reserves).

They pay less interest on reserves.

The effect on the economy of banks holding reserves rather than securities is otherwise negligible because both securities and reserves can be used to satisfy any liquidity requirements, so reserves and securities are functionally identical.

That’s why it’s so dumb that people get in a flap over the idea of the Treasury issuing reserves “out of thin air” but they are fine with the Tresury issuing new securities “out of thin air”.

They’re more or less the same operation.