On Wednesday the European Central Bank (ECB) meets and as Neil Dennis of the Financial Times writes,“Given the rapid deterioration in confidence and business activity surveys in May, there will be added pressure for policy makers at the European Central Bank and the Bank of England to act at this week’s monetary policy meetings.”
Thursday all eyes will turn to Fed Chairman Bernanke as he testifies to the Joint Economic Committee in regards to the economic outlook. On the heel of the disappointing May payroll report, fears that the European Crisis may be widening, and the purported end of Operation Twist set for this month Mr. Bernanke will certainly have his E.F. Hutton (or should we say J. Kyle Bass) moment.
In Plumbing the Unthinkable, Barron’s columnist Randall Forsythe ponders the policy response to record low interest rates and offers that “the possibilities include a third round of quantative easing QE3,” and that “Friday’s events also raised speculation that the European Central Bank could resume buying Spanish and Italian bonds.”
According to Business Insider, Goldman Sachs is also getting into the act and making the case for QE3.
The mere fact that the number 3 follows “QE” should be evidence enough of the ultimate futility of such policy. But as sure as night follows day, the political pressure will always be for policy makers to “do something.”
The $64,000 question will soon become what that “something” is, as each attempt to kick the can down the road results in a shorter and shorter boot.
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