Here is a simpler explanation of QE2: The same people who always get us out of recessions, eg private business people, will eventually get us out of this one. However, the government has an incredible stake in trying to convince everyone that they actually drive the economy. Therefore, it is important for the feds to be able to claim credit for any recovery. Since some sort of natural recovery from the recession is likely in 2011 (and per Mark Perry may already be in progress) the government needs some program that it can credit for the recovery. Since Congress will not pass Obama's (or Krugman's) desired son-of-stimulus bill, then the Fed must step up to create a plausible high-profile program.