"To keep prices stable, the Fed must see to it that the quantity of money changes in such a way to offset movements in velocity and output, " he wrote in this newspaper in 2003.
The sharp expansion of the monetary aggregates since the beginning of September was needed to offset the dramatic decline in velocity and the hoarding of reserves by the banking system.
Interest rates can be lowered to zero and money can be printed ad nauseum, but if excessive debt within the system is restraining private demand, the decline in the velocity of money will offset the benefit of the additional supply of dollars.