On the definition of "money printing": Ben Bernanke's use of the term "money printing" is evolving. In the past, he used the term to refer to the Federal Reserve's ability to increase the Reserve Accounts of the banks. He is now attempting to change the definition to encompass only the actual coinage that the mint engages in.
On how the Federal Reserve creates money: Every bank in the country has a Reserve Account with the Fed. They are each required to keep a certain ratio of assets to reserves. The Fed has the ability to change the number for any given bank's Reserve Account. The idea is to either spur banking activity by increasing the reserve, or to restrict banking activity by decreasing the reserve.
On Quantitative Easing: Quantitative Easing consists of the Fed purchasing securities. They do so by increasing the number in the Reserve Account. If anyone other than the Fed did this, it would be considered fraud and counterfeiting. But when the Fed does it, it is sophisticated monetary policy.
On our Fractional Reserve Banking System: Dealers and banks sell their securities to the Fed, but the Fed does not have any money. They just change the Reserve Account number for that particular bank. When the Reserve Account value is increased, the banks are able to lend out more money and buy securities. That is a form of money creation.
On current Fed policy: Federal Reserve actions in the fall of 2008 and the spring of 2009 can be considered emergency measures. But step back and consider why we had a bursting of the housing bubble and such turmoil in financial markets; we had malinvestment and markets that were mispriced. These markets must return to equilibrium. But the Fed is trying to prevent equilibrium. Maybe housing prices are still too high, and maybe further deleveraging is necessary. The Fed is attempting to stop that from happening. Things cannot get better until we reach that equilibrium. The Fed is making it worse in the long run.
On what Fed policy means for the future: The Fed's all-out attempt to stop an equilibrium from being reached - from manipulating interest rates, to advising Congress on foreclosure policy aimed at preventing price adjustment - will just hold things up for a while. It is the equivalent of shooting a pain patient up with morphine; it does not treat the underlying issues - it just makes the patient feel better for a little while.
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