[mikhailfranco]

Related to (1), there is the moral hazard of bailing out the extreme risk takers and profligate borrowers, but punishing the careful savers. It just encourages future financial gambling (Greenspan/Bernanke put) and Too Big To Fail mentality.

There is also the loss of true interest rate signals for making investment decisions, and consequent mal-investment caused by 'desperately seeking yield'. Economies progress by creative destruction, not protecting sunk costs in old industries and pandering to vested interests. Just look at Apple - biggest corporate cash pile in history, biggest bond issue in history - something is seriously wrong with interest rate signals (over and above the repatriation issue).

The problem of the boom was over-borrowing to consume. The solution for the recession is saving to invest i.e. create lending for building of productive capacity. Printing money to lend to consumers to buy imports does not make the economy any better, especially when you don't give it to the consumers with tax reductions (or wage increases from the corporate cash pile), but give it to the banks and let them inflate financial assets instead - that doesn't even achieve the dumb thing you were trying to do in the first place!

[parasubvert]

I was following you up to the last paragraph. the issue is that bonds and cash are effectively equivalent now due to low interest and inflation. So we are suck in a liquidity preference trap. Stocks are showing some signs of inflation, but bonds surely are not - everyone is holding US treasuries or cash!

Printing money without associated fiscal stimulus does not help things so long as people expect inflation to remain low. So QE3 is arguably better than nothing but probably will be as ineffective as thr previous attempts. OTOH Japan now is the only country where they are deliberately trying to promote inflation, so it will be interesting to observe if they can pull it off and drag themselves out of deflation.