The Fed’s first round of quantitative easing is believed to have been around two trillion dollars. QE2 was a neat $600 billion. Neither produced the hope-for result. So — how about QE3 with a price tag between $700 billion and another easy trillion? Sure thing, bud:
If the Fed decides that the US economy needs another round of monetary easing, the price tag likely would be between $700 billion and $1 trillion, according to a new analysis.
While the Fed has not said explicitly whether it will enact a third round of quantitative easing — or QE3 in market parlance — speculation has grown that the central bank will step in should the economy stall again in 2012. The Fed next meets Tuesday, when the topic of more easing is likely to come up.
Someday, the Fed is going to have to suck all these extra trillions of dollars back out of the economy, to avoid a nasty bout of inflation, or even hyperinflation. To do that, it will sell off the massive stores of treasury notes it bought to inject all this money into the economy.
Here’s the question we need to ask now: What price will the Fed actually get? Bernanke has printed up these trillions — but how many of them will he actually get to make go “poof,” if wary buyers won’t pay face value for those bonds?
And buyers might well become very wary, if Washington doesn’t get its budget act together, yesterday.
If the Fed can’t balance its books, it’s insolvent. And we’re stuck with an “unintended” inflation.
This scares the hell out of me.