Financial markets and even bullion sold off again in the wake of Fed chairman Ben Bernanke’s downbeat comments on the US economy last night with not a hint of a possible QE3 money printing exercise to stimulate the economy.
The reasonable fear in markets is that the ‘Bernanke put’ is over, and that without the Fed as the buyer of last resort financial markets will crumble. Then again you could argue why would you expect a QE3 to be any more effective than a QE2.
Except of course from the perspective of financial markets QE2 has been great news. It put a quick stop to the 17 per cent stock market slump last summer and paved the way for another rally, until a little over five weeks ago when the end of QE2 began to worry investors.
Now that the political support for another bailout package has completely gone in the US, there is only QE3 that might be pulled like a rabbit from a hat to save markets from falling through the floor. How much pain can Bernanke tolerate?.......read on