Three Reasons Why QE 3 Ain’t Coming Anytime Soon
by Phoenix Capital Research
The primary reason the markets have held up since QE 2 ended was because the bulls believe QE 3 is coming soon. I myself believe this is true (that QE 3 is coming) but it’s going to take a lot more for it to arrive than most expect.
The three reasons I believe this are:
1) Internal dissent at the Fed
2) Bernanke is now a political PR weapon
3) The UK riots
Regarding #1, during the latest Fed FOMC meeting, three Fed Presidents voted against the policy of extending ZIRP through 2013. This was the most dissenting voters since 1992.
What this tells us is that the days of easy free money from the Fed are over. Remember, this wasn’t three dissenting votes against QE 3, this was three dissenting votes against keeping interest rates low.
Understand, these guys would only vote against loose money if they knew it was problematic. And I can assure you, some of them are thinking about what’s next career-wise (the next Fed Chairman will have to be more hawkish). If I were a Fed President looking to move up the ladder, I’d certainly be building a track record of voting against more money printing.
So any move to launch QE 3 is going to be met with fierce resistance. Indeed, the only thing that might permit QE 3 to happen would be for a large bank to fail or a full-scale market crash (S&P 500 sub-1000).