Background: According to standard monetary theory, Quantitative Easing policy implemented after the financial crisis did not entail a credit explosion because the money multiplier has plummeted, as banks have decided to hold excess reserves. Yet, mainstream theory warns that the collapse of the multiplier is ‘temporary’ because in case banks decide to lend reserves massively there may be a burst of inflation. On the other hand, critics of conventional wisdom hold that Quantitative Easing did not lead to a credit explosion and inflation burst because i) the money multiplier does not have any meaningful sense; and because ii) “the loan is not created out of reserves. And the loan is not created out of deposits: Loans create deposits, not the other way around” (Sheard, 2013). Question: Critically evaluate both approaches sketched above.