Quantitative Easing is not News

Canada's very own Committee on Monetary and Economic Reform (COMER -- their acronym, not mine) apparently has champagne corks popping over signals from the Bank of Canada via C.D. Howe and the Harper government that, now that interest rates are zero, they are moving to a strategy of "quantitative easing" (read printing money).

What these guys don't seem to realize (or realize and don't care) is that said new money is to be shoveled into the coffers of the banks and not directed toward vast new infrastructure projects.
Of course, the rationale for such projects is strong -- fiscal stimulus is one of two key tools government can employ in the face of a crisis such as this. But given that the interest rate for government is effectively zero, it doesn't much matter where the financing comes from.

Indeed the reason for quantitative easing is simple -- governments (now Canada's too) are up against a zero interest boundary, so traditional monetary policy is no longer a possibility. Krugman, among others have been writing about this for months -- and in the case of studies of the Japanese economy, for more than a decade. To go back even further, our situation now is that of a classic Keynesian liquidity trap that has been well understood for more than half a century.