• QE2 was effective, eased financial conditions: stocks rose, volatility fell, spreads tightened, just like ordinary easing measures would have worked
• Only way to conclude QE2 failed is to have viewed it as a cure-all at the outset; Fed did not view it that way
• Trade off less attractive to do more QE2; inflation and inflation expectations higher; rapidly rising inflation not conducive to hiring (sounds like no QE3 to me!)
• Long-term unemployment the worst in the post-war period; consequences are grave as skills erode; one reason Fed has been so aggressive
• US has long-term fiscal problem; didn’t need S&P to tell us that…Hopes it will spur congressional action
• Will hurt growth, standard of living if not addressed; both sides of the aisle are taking steps to address problem
• Addressing fiscal deficits a top priority; cuts so far have not impacted short-term economic activity
• If spending cuts hurt economic growth, Fed would take that into account in making appropriate monetary policy
• Uncertainty going forward: North Africa, Middle East, Japan, European debt