After Bernanke's statement today that the Fed will not enact QE3 I watched the markets plunge and realized that the markets still had some expectation that Bernanke was going to use his magic printing press again. Not really a big surprise, but it started me to thinking that at this point, investors expect him to put out.
After all, Bernanke has pretty much let banks have their way with the Fed ever since he became chairman. It seems incongruous to them that he would change his position. In fact, the buzz after his announcement pretty much amounted to "He says no now, but he'll say yes next month."
Despite his talk of "other tools" available, we all know that anything other than QE3 is pretty much idle talk... what else does he really have? He's already guaranteeing interest rates 2 years out. What other incentive makers does he have? If it's going to be anything other than flooding the market with more worthless paper, it will be a surprise to everyone.
Ben's printing press is just tired right now. She'll be back at work as soon as the bruises heal.