Implications of declining money velocity
http://www.forbes.com/sites/traceygreenstein/2011/09/20/the-feds-16-trillion-bailouts-under-reported/#5a1dec1d6877

The decline in money velocity is due to enormous monetary injections, which mostly sat in recipient bank accounts and had no effect on the real economy. Under the Keynesian and monetarist theories that central banks operate upon, an increase in money supply should ease liquidity constraints and allow the economy to resume growth. In reality not much further growth was possible, likely because of the stagnation in conventional oil production.



To answer your questions:


Yes
Not yet
No, it indicates a lack of viable uses for the cash
Interest rates fell because of the relatively small decrease in banks balance sheets coinciding with a sharply declining return on capital, and thus diminishing incentive for investors to leverage, causing increasing supply relative to demand for credit