Here’s the difference between QE1 and QE2: In QE1, the Federal Reserve bought housing debt. In QE2, the Fed bought Treasury bonds. QE1 is widely considered to have been more effective. And Princeton’s Alan Blinder, a former Vice Chairman of the Federal Reserve, thinks that if you read its latest release closely, the Fed has learned its lesson, and may even be moving towards a second round of QE1. Here he is in today’s Wall Street Journal:

For more than a year now, the Fed has been allowing its portfolio of agency debt (e.g., Fannie Mae and Freddie Mac) and mortgage-backed securities (MBS) to shrink naturally as mortgages are paid off and securities mature. To maintain the size of its balance sheet, the Fed has been reinvesting the proceeds in Treasurys. But starting ‘now’ (the Fed’s word), and continuing indefinitely, those proceeds will be reinvested in agency bonds and MBS instead...The amounts involved will not be large at first, perhaps in the $150 billion to $225 billion per year range. But the idea is, as they say, scalable. A future round of quantitative easing (QE4?) that concentrates on private-sector securities like MBS, rather than on Treasurys, is now imaginable...if we indulge ourselves in a bit of blue-sky thinking, we can even imagine the Fed doing QEs in corporate bonds, syndicated loans, consumer receivables and so forth.