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Risk and rewards in Fed’s plan

Perspective: A QE2 Q-and-A

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The Federal Reserve's formal QE2 announcement will arrive at 2:15 p.m. EST next Wednesday, the most-telegraphed punch in the history of punching. Hence, a QE2 Q-and-A. Monetary "easing" is a central bank's standard antidote to recession, tried and effective hundreds of times here and elsewhere. The central bank cuts its cost of money and "injects" reserves into banks by buying Treasurys from them with invented money. These operations ignite lending and borrowing, and we recover. In this Great Recession, the Fed began to ease early, in 2007, and then massively post-Lehman, in September 2008. Without effect ... no response at all. Banks were and are incapable of providing credit: capital exhausted; crippled by brainless demands by government that they raise more; fear of new losses; and fewer borrowers. A controlling equation: "M multiplied by V equals GDP(p)." More simply: The quantity of money ("M") times its rate of turnover (veloc...