More Speculation About QE3
Bernanke delivered his much-anticipated Jackson Hole speech yesterday and it was a main catalyst in moving the markets up on Friday as it ramped up speculation about another round of quantitative easing by the Federal Reserve despite the vagueness of Bernanke's remarks; Paul Krugman offered up a pretty accurate summary of his speech.
It should be noted that even if QE3 is initiated in the coming months, its effectiveness is debatable. For one, experts such as Bill Gross, are skeptical it will have a significant effect on the country's job market.
Also, an interesting sidenote by FT Alphaville's Masa Serdarevic: the Federal Reserve is actually shrinking its balance sheet at an annualized 6% contraction. This can, of course, be interpreted in three ways: either it is a sign the Federal Reserve is reluctant to increase its balance sheet through drastic measures such as QE3, it is a sign the Federal Reserve is making room for QE3, or it is a sign of nothing. Such is the nature of Federal Reserve tea-leaf reading nowadays.