Nice article and explanation of the channels the QE3 money could flow through. Thanks for that.

But how the lower rates and providing further chances to the underwater borrowers to refinance would promote a better risk management and risk awareness? As exactly the same policy is what lead to the current crisis...

I agree that in short term (2-5-10 years) this would inflate prices of assets (but mostly financial assets, as we see) but in a longer term this is hardly a sustainable course of action even if a buffer (or a "black hole" like the current FED's purchases of MBS) is found. As Mr. Bernanke himself has said, one of the purposes of the QEs is to boost stock prices which in turn is expected to increase the disposable income and consumption. Apart from changing the traditional idea of the stock prices reflecting the condition of the economy into the modern one of the stock prices leading the economy, such a policy brings up the question of whether the stock prices or the prices of other assets in general, should be included in the measurement of inflation as those are expenses people make along with the more traditional ones. If the definition of inflation is expanded the whole effect of QEs on real growth would be much different.

Regards,
Emil