I really, really thought Greg Mankiw was smarter than this. In fact, I know he is smarter than what he has to say about so-called quantitative easing (QE2). So that leads to a sad conclusion; Mankiw thinks it's okay for the Fed to monkey around with interest rates.
Check out this video for a complete explanation of QE2 in plain English.
Interest rates are prices. Prices provide vital information to people about value. When government distorts prices, bad things happen. Mankiw knows that, but evidently chooses to ignore what he knows when it comes to money and interest rates and the Fed.
For those of you who want to read more about what Greg Mankiw now says he supports, read this