"I do think that the Federal Reserve will restart quantitative easing over the next few months. I think the economy's going to be at best very weak, so weak that unemployment will begin to rise again and I think that will be the signal for the Fed to resume quantitative easing".
"It could be for example if angst about the European debt situation were to flare up again and we'd see the equity markets, stock prices fall another 5-10-15%, I think that would qualify and certainly push us back into recession".
On Friday Ben Bernanke gave a speech in Jackson Hold and said:
"First, the FOMC will strongly resist deviations from price stability in the downward direction"
"Second, regardless of the risks of deflation, the FOMC will do all that it can to ensure continuation of the economic recovery. Consistent with our mandate, the Federal Reserve is committed to promoting growth in employment and reducing resource slack more generally". (see post for full speech)
Check out what John Hussman of the Hussman Funds had to say about QE2 and the US Dollar
Why Quantitative Easing is Likely to Trigger a Collapse of the U.S. Dollar
"A week ago, the Federal Reserve initiated a new program of "quantitative easing" (QE), with the Fed purchasing U.S. Treasury securities and paying for those securities by creating billions of dollars in new monetary base. Treasury bond prices surged on the action. With the U.S. economy predictably weakening, this second round of quantitative easing appears likely to continue. Unfortunately, the unintended side effect of this policy shift is likely to be an abrupt collapse in the foreign exchange value of the U.S. dollar." (continue reading)
Interesting post. I'm going to chart out the US Dollar Index (USDX, DXY) next with technical analysis. Here's the Mark Zandi Video courtesy of Bloomberg TV.