Alex: the Fed can never technically force anyone to buy/sell in open market ops. the article is making a somewhat leap in its point on bonds to deposits mechanism. you can see from the graph displayed that there is a lag for fed balance sheet vs. net deposits. the article is basically saying that when the fed buys bonds, it will eventually make its way to a bank's deposit

to the author: i'm not as fluent in fixed income, though from one dukie (I'm presuming based on raleigh/durham) to another, could you explain your central point of, "Fed cannot raise interest rates with such a large amount of reserves in the system"? It seems like you're presuming that the fed is using open market ops to achieve this (vs. direct federal funds rate hike) in this statement? i thought your article brought up some good points, though the language and approach is very high context (vs. low context http://en.wikipedia.org/wiki/High-_and_low-context_cultures) - seems like NC is rubbing off a bit