The Fed’s QE2 and the Economy: Sailing to Safety or a Ship of Fools?

Quantitative easing is a largely experimental tool employed by the Federal Reserve to address a continuing sluggish economy and the renewed potential of deflation. That the Fed faces this prospect is final proof positive that President Barack Obama’s Keynesian stimulus policies have failed, leaving monetary policy as the sole remaining major stimulus tool. The risks associated with quantitative easing are substantial, including that it will fail, or will trigger a resurgence of inflation with or without a pickup in output growth.

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