First, I will mostly skim over the subjective aspects of the impending MOAC debate e.g. sentiment and media propaganda, since I have been pounding away on those recently. I showed that options volatility is at the same level of complacency as the all time high in 2007. And just today, ZeroHedge indicated that equity allocations are at the same level as 2008, right before that crash. I showed that Walmart was the leading stock prior to the Lehman collapse as it is now, and that the Dow Transports have been diverging from the Industrials for months indicating weakness in the real economy. But of course, my main assertion is that the markets, media and public are literally stoned into complacency by monetary stimulus. Granted my proof of sentiment is clearly anecdotal and based on data mining of Idiocratic TV listings such as: "I Didn't Know I was Pregnant", "Honey Boo Boo", "Long Island Medium", "Hoarders", "16 and Pregnant", "Hillbilly Handfishin'", "U.S. Presidential Election 2012" etc. etc.
1) Attempting to use monetary policy as a long-term support for the economy. Their implicit assumption is that manipulating the money supply is a proxy for sustainable innovation and production. Clearly by the amount of ongoing and ever increasing liquidity applied over past decades, that's a false assumption. Using economists' favourite analogy of a small island - if 10 people with different skills sets were on an island and the money supply was increased, all that would happen is that the price of everything would go up (the monetary unit would decrease in value), but production would stay the same. Take a slightly more nuanced example where instead of giving everyone more money, there is a bank willing to lend and the amount available to lend suddenly doubled. In that case, in line with the situation we face now, unless someone had a need to borrow to invest in their business, nothing would happen, even prices would likely stay the same. That's the liquidity trap scenario we find ourselves in now.
Other than the above, monetary policy works great.