Commentary: Why Bernanke will be forced to institute QE3
The Fed is serious about freezing its balance sheet starting in June. They will continue to buy Treasurys as issues mature and are replaced. But, the momentum of money growth will slow down and that is the key to understanding what will then happen. If Treasury rates do not take off, then my assumption about domestic and foreign demand for Treasurys will be correct. If they do take off, it will be an indication of a shrinking money supply, which will lead to economic stagnation or even a market bust. On the other hand, I don't believe the Fed will play "chicken" during an election year, and when things turn ugly they will announce QE3 and that will kick the can down the inflationary road. QE3 may be the last installment of this monetary madness. Read QE3 commentary from Jeff Harding, on MarketWatch.
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