Ben Bernanke’s speech at Jackson Hole on August 26, 2011 did not give a clear signal to markets about the Fed’s intentions regarding the third phase of quantitative easing (QE3). But don’t forget the fact that QE2 was announced by the Fed in September 2010. There are also a growing number of economists who are opposed to continuing to print money, as this can lead to long-term negative consequences.
Financial markets and public opinion are increasingly criticizing the Fed for its policy of quantitative easing, as QE1 and QE2 yielded almost no results. However, many financial market participants would like quantitative easing to continue, as it will have a positive short-term effect on the stock market. There are also growing concerns about a second wave of recession, often compared to the Great Depression of the 1930s.
Mark Zandi, chief economist at Moody’s Economics.com, said last week that the United States is on the brink of financial collapse and that another recession cannot be ruled out. Everyone is watching the stock market closely and waiting for the final decision of the Fed: whether it will be seen from the outside or whether it will rush again to help the next printing of money.
The impact of a possible third round of quantitative easing (QE3) on the price of gold remains questionable, as the global debt crisis is intensifying and financial markets are watching closely. Gold has become the “safe haven” of the world as physical gold has no credit risk. Investors are concerned not only about systematic risk in financial markets, but also about sovereign risk. This has been facilitated not only by FRS policy with its quantitative easing, but also by helping other banks and currency depreciation; all of this is forcing investors to flee to hard assets.