taojaxx

Fearmongering about the risk of looming hyperinflation is exactly what the Fed wants. "The major danger with a zero lower bound for the interest rate," Swedish policy-wonk Lars Svensson says (.pdf), "is that inflation expectations will be too low and even negative, and that the real interest rate will thus become too high."

More seriously if we want to keep the politics away for a moment: Svensson is right and the Fed's job is tough: buy government bonds to cap the nominal long term rate as it is the risk free rate from which other yields are derived through credit spreads. At the same time, ensure that the money injected puts a floor under inflation expectations (namely increasing them) for the reasons mentioned by Svensson, i.e. ensure that the expected real interest rate is low enough.
Japanese experience revisited, hopefully more successful.