The Fed's quantitative easing may be unconventional, but it is designed to work through the same channels as conventional changes in short-term interest rates; by lowering long-term interest rates, increasing confidence, boosting asset prices and lowering the exchange rate. The problem is that lower long-term interest rates are doing little to boost domestic demand directly. As a result, the emphasis has switched to the impact on asset prices and the dollar, leaving the Fed open to claims that it is engineering bubbles and engaging in "beggar thy neighbour" currency wars. Nevertheless, given the modest size of the programme, the hysterical reaction to QE2 from some quarters is completely over the top.
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