Some movie sequels are great, like Godfather II, Empire Strikes Back, Return of the Jedi, Toy Story 2 & 3, and Terminator II but most are not, like Godfather III, Revenge of the Nerds II, Dumb and Dumberer, and CaddyShack II. Many sequels of course overstay their welcomes. As we await Bernanke’s speech on Friday, many are calling for another QE sequel titled Printing, the Path to Prosperity. QEII as it’s otherwise known was well received by markets because it helped to lift asset prices, temporarily as we’ve seen, but critics knew there was no real life economic impact as evidenced by the almost zero growth seen in the 1st half of 2011. If QE3 gets the greenlight, expect again only a cheer from asset markets but a cheer that won’t last very long again because the Fed has well worn out its welcome that will give no help to actual economic growth. I’m of the opinion that we got pseudo QE3 on Aug 9th and the only thing Bernanke will do on Friday is explain the bullets he has left but won’t be pulling any of those impotent triggers now, likely disappointing asset markets. He had 3 dissenters just to get thru a timeline on ‘exceptionally low’ rates, the internal heckling has begun. Plosser said it well last week, “better part of wisdom was patience.”
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