What happens if it doesn't work?

There are money bazooka's being fired around the globe with the addition of the BOJ joining the fun.  There is a legitimate problem with the global economy.  Check out the global PMI.

The global manufacturing PMI is now clearly contracting and is at the lowest level since the last recession ended.  I believe this is one source of the central bank panic going on around the world.  In Why is the global economy slowing?  I attempted to make the case that the problem is too much debt combined with high food and energy prices.  Lets look at some things that probably are not the problem.

 Lets start with some central bank balance sheets.  Click for larger image.

Looking at those charts it seems hard to argue there is a lack of liquidity around.  QE1 worked because liquidity was a problem during the financial crisis in 2008.

If liquidity is not the problem, what about high interest rates.  Here is a table of some interest rates from around the world.

Source: global-rates.com

There are 8 countries out of 26 listed that have rates 5% or higher.  On the same web site there is a table of inflation rates so we can see the real interest rates of those few countries with higher rates.

Country      Interest Rate  Inflation Rate  Real interest rate
Brazil         7.5%             5.2%               2.3%
Chile          5.0%             2.5%               2.5%
China          6.0%             2.0%               4.0%
Hungary        6.75%            6.0%               0.75%
India          8.0%             9.8%               1.8%
Indonesia      5.75%            4.5%               3.25%
Russia         8.25%            5.6%               2.6%
South Africa   5.0%             5.0%               0.0%

Source for inflation data

The real interest rates in the few countries that have somewhat elevated rates are actually still low.  It is hard to argue that high rates are the problem. 

We have all this money sloshing around in the U.S., but check out the velocity chart.

The velocity of money is still crashing.  I suspect that is going on in many other countries in the world.  This is a case of the often heard expression "pushing on a string/rope".  You can push as hard as you want, but the end result will still be the same.

My question is simply this.  If liquidity and interest rates aren't the problem with the global economy, how is more central bank money printing going to help?  What happens if we end up in a recession with rates already low and the FED already doing QE?  What happens if some global event, like Israel attacking suspected nuclear sites in Iran, causes a spike in oil prices and a global panic sell off in stocks?   I am sure the FED will up the dose of QE, but isn't that like selling a product at a loss hoping to make it up in volume?

Bob