Yes, banks are holding tons of cash for people who want to be liquid.
Banks don't have the capital to lend it out, so no hyper-inflation.
But/and there’s the other half of the liquidity trap going on here:
If you were a banker, would you want to lock your balance sheet into pitiful yields on your loan portfolio at today’s lending rates? You know, deep in your guts, that today’s low yields cannot last forever. You’re thinking “If we can just hold out long enough for rates to go back up, so we’re not committing ourselves to making a couple pennies on the dollar of lending for 5 to 30 years... we could conceivably double our returns if we just wait for rates to go back up to 5% on consumer/home lending.”
This is the other half of the problem the Fed has created: banks don’t have lots of uncommitted capital, but what they do have they want to sink into something with a better cash flow.
Not to worry. Can the call to “Start those printing presses!” be far away?