BY MARTIN HUTCHINSON, Contributing Editor, Money Morning
At the end of last month, the U.S. Federal Reserve brought down the curtain on its $600 billion "quantitative easing" initiative, a U.S. Treasury-bond-purchase program that investors liked to refer to as "QE2."
Fed Chairman Ben S. Bernanke has indicated that he does not intend to carry out a follow-up "QE3" program.
But here's the reality: The U.S. federal deficit is running at about $1.6 trillion, meaning we need to sell a lot of Treasury bonds to finance the shortfall. So if the Treasury-bond market gets a case of "indigestion" - meaning there aren't enough buyers to fulfill our massive financing needs - many folks believe that Bernanke will have to step in with the-much-talked-about "QE3" bond-buying program.
But Ben, please be forewarned: If you do this, our future is clear ...
Fed Chairman Ben S. Bernanke has indicated that he does not intend to carry out a follow-up "QE3" program.
But here's the reality: The U.S. federal deficit is running at about $1.6 trillion, meaning we need to sell a lot of Treasury bonds to finance the shortfall. So if the Treasury-bond market gets a case of "indigestion" - meaning there aren't enough buyers to fulfill our massive financing needs - many folks believe that Bernanke will have to step in with the-much-talked-about "QE3" bond-buying program.
But Ben, please be forewarned: If you do this, our future is clear ...
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