Quantitative Easing was intended to kick-start the economy by tackling the credit crunch, making new credit available in the US and Europe.
What actually happened was that the financial institutions preferred to place the money where they could get a bigger return — emerging markets — with the result that not only did the intended consequences not happen, but emerging markets were subject to large influxes of capital: a credit bubble. This drove local inflation up, as well as boosting asset prices for those who owned assets.
Second, fears of inflation at ‘home’ also drove money into commodities.
And probably third (though not mentioned in the article), the large influx of money was such a clear and major event that it led many people to react in the same ways at the same time, leading to increased volatility, and the reinforcing cycle of risk-on/risk-off behaviour that has characterised markets of late.
“With the luxury of hindsight it is possible to argue that QE2 did more harm than good to both the economy and the polity.”