Federal Reserve Board Credibility, Plus 50 Cents, Will Get You a Cup of Coffee by Dean Baker
If this policy was successful, it would lead to lower real interest rates, which would in turn lead to more consumption and investment. Ideally we would also see a decline in th real value of the dollar, leading to more net exports, the essential long-term path to full employment.
My view is that this path would likely be successful, if the Fed were really committed to it. That means continually buying up vast amounts of assets if the inflation rate did not appear to be rising. This should ultimately freak enough investor types into thinking that Bernanke was sufficiently nuts that he could cause inflation. They would then hedge themselves against this risk by buying up all sorts of commodities to protect against inflation, which would then lead to inflation.Did Ben Bernanke Just Say That the Fed Made a Mistake by Allowing Inflation to Get Above 2% During the Great Depression? by DeLong
Fed Policy Remains on Hold by Mark Thoma
And this has been another edition of FED FAIL in the 21st Century.