QE2 is working?
Well, that’s relative to how short your perspective is.
Juicing up the economy for the moment? Yes. Enough to start getting some positive private sector employment started? Yes. Enough to grease the skids on Wall Street with growing (actual or inflated?) profits? Yes.
And, enough to build some big inflationary pressures into the economy? Yes. Big enough that they are already showing - big time - in basic food stuffs and basic consumables, before QE2 even ends? Yes. Big enough that the consumer “basket” of goods is rising rapidly while wages are flat? Yes. Which is going to very soon erupt in wage pressures? Yes. Which is going to add to domestic production costs? Yes. Which is going to slow employment growth again? Yes. Which will take some of the grease out of Wall Street? Yes.
So, it’s really a matter of perspective - short term or long range.
The only cure for an inflated currency bubble is to start deflating the bubble and wait until you’re done. Blowing up another cheap money-led bubble is not a cure but a curse that will make the final deflation worse.
The total M3 money supply is $13 trillion. Only 2/3rds of the $600 billion QE2 has taken place, so we are talking about $400 billion addition to the $13 trillion money supply. That's enough to cause a one time 3% inflation if everybody expected the FED to never undo what they've done. I expect them to at least partially undo what they have done. (And if they complete the entire $600 billion that should bump it to 4.5%).
The inflation we are seeing is oil related. And is basic supply and demand. We've sat on our hands and not secured ourselves a supply of energy. And that is foolish.