Krugman argues that the main benefit of QE is that it increases inflation expectations, not necessarily inflation itself in any direct or immediate sense. So Redstar is correct in pointing to the increase in inflation expectations post the QE announcement (as Krugman has also done). Krugman also points out the fallacy of "runaway inflation" fears that opponents regularly cite - saying most of the money will end of sitting in bank accounts/vaults, having little effect on real economic activity or anything else.

Thus the economic benefits of QE are very marginal at best especially as interest rates approach the zero bound.  We have reached the limits of what monetary policy can do.  What QE CAN do - as pointed out by Stiglitz below, and by Chris Cook in relation to oil prices - is to create asset price and commodity price bubbles - as  investors/rentiers search desperately for ever more exotic instruments to generate a return.  

These can cause a contraction in the real by economy by increasing costs/making it less attractive to invest in productive activity here - but I expect that to become more of a problem further down the business cycle.  At the moment increased (say) houses prices are encouraging an increase in construction activity which (in Ireland at any rate) is still way below the historical average that is required given demographic trends.

Index of Frank's Diaries