Monetary Policy 1 Interest-rate driven monetary policy (which I’ll call Monetary Policy 1) is the most effective because it has the broadest impact on the economy. When central banks reduce interest rates, they stimulate the economy by a) producing a positive wealth effect (because the lower interest rate raises the present value of most investments); b) making it easier to buy items on credit (because the monthly payments decline), raising demand—especially for interest-rate-sensitive items like durable goods and housing; and c) reducing debt-service burdens (which improves cash flows and spending). MP1 is typically the first approach to a debt crisis, but when short-term interest rates hit around 0 percent, it no longer works effectively, so central banks must go to the second type.

美联储货币政策1，调整利率来影响经济。降低利率刺激经济投资消费，升高利率抑制经济。往往是最常用的手段。但将利率下降到0之后就会失效。

Monetary Policy 2 “Quantitative easing” (QE) as it is now called (i.e., “printing money” and buying financial assets, typically debt assets), is Monetary Policy 2. It works by affecting the behavior of investors/savers as opposed to borrowers/ spenders, because it is driven by purchases of financial assets, typically debt assets that impact investors/savers the most. When the central bank buys a bond, it gives investors/savers cash, which they typically use to buy another financial asset that they think is more attractive. What they do with that money and credit makes all the difference in the world. When they invest in the sort of assets that finance spending, that stimulates the economy. When they invest in those that don’t (such as financial assets), there must be very large market gains before any money trickles down into spending—and that spending comes more from those who have enjoyed the market gains than from those who haven’t. In other words, QE certainly benefits investors/savers (i.e., those who own financial assets) much more than people who don’t, thus widening the wealth gap.

QE量化宽松，简称印钱。用于购买政府债券以及金融资产。会主要影响投资者和储蓄者，央行给市场提供的资金，各个投资主体会选择另外的资产进行投资，如果被投资的资产是直接影响或者用于消费的那就会刺激经济，否则就比较难以通过消费直接流入实体的经济。这个货币政策是利好于拥有金融资产的主体的，因此会加剧贫富分化。

While MP2 is generally less effective than interest-rate changes, it is most effective when risk and liquidity premiums are large, because it causes those premiums to fall. When risk premiums are large, and money is added to the system, actual risks are reduced at the same time that there is more money seeking returns, which triggers purchases of riskier assets that are offering higher expected returns, driving their prices up and producing a positive wealth effect. But over time, the use of QE to stimulate the economy declines in effectiveness because risk premiums are pushed down and asset prices are pushed up to levels beyond which they are difficult to push further, and the wealth effect diminishes. In other words, at higher prices and lower expected returns, the compensation for taking risk becomes too small to get investors to bid prices up, which would drive prospective returns down further. In fact, the reward-to-risk ratio could make those who are long a lot of assets view that terribly returning asset called cash as more appealing. As a result, QE becomes less and less effective. If they provide QE and private credit growth doesn’t pick up, policy makers feel like they are pushing on a string.

主要提到了QE的问题，很多钱涌入市场是需要寻找收益的，会推高资产价格，当价格过高而收益降低，投资者就没有足够的意愿去承受高风险带来的低收益，而更愿意持有现金，QE就会降低效果。