• Fed can adjust quantitative easing in response to incoming data the same way it would adjust policy rates
  • Disinflation trend has developed in 2010; deflationary equilibrium difficult to escape
  • FOMC should try to avoid Japan’s experience
  • Must defend price target from bottom as well as top
  • Financial market effects of QE the same as conventional policy, including dollar decline
  • Real effects of QE to be felt in 6-12 months
  • QE has no impact on US fiscal outlook, which remains poor