Fed will launch ‘QE3’ by fall, expert says

WASHINGTON (MarketWatch) — The weak June nonfarm payrolls report will spur the Federal Reserve to launch a third round of asset purchases, known as quantitative easing, sometime this fall, said David Blanchflower, a professor at Dartmouth College.

“QE3 looks increasingly on the table. What are they going to do, let unemployment start rising again?” Blanchflower said in a telephone interview.

Blanchflower, a former member of the Bank of England’s monetary policy committee, said the current U.S. malaise is a rerun of the England economy earlier this year where talk about government austerity made consumers rein in their spending, and businesses then slammed the brakes on investment and hiring.

“The sheer talk of austerity pushed down animal spirits and raised markedly the prospects of further QE. How else are you going to get stimulus?” he asked.

http://www.marketwatch.com/story/fed-will-launch-qe3-by-fall-expert-says-2011-07-08?dist=afterbell

Yeah, blame it on animal spirits - like usual...

 

He's right. If there is no QE3, cash becomes King.

 

Yeah, but take this with a pinch of salt, as this is Blanchflower talking. He's part of the ultra-dovish central banker fringe, with peeps like Posen and Svensson and maybe even more extreme than those two.

 

The Bernank is more dovish.

 

No, not anywhere near... If Blanchflower had his way, we'd be on permanent QE, come hell or high water.

 

I stand by my statement. Bernanke will print a quadtrillion to avoid an economic contraction.

 

Fed can not print forever. At some point, other countries will stop accepting U.S. dollar if it tries.