Ben Bernanke has no sure fire policy solution for economic stagnation. QE2, the $1 trillion quantitative easing expected, hoped for, prayed for, gossiped about, will only pour money into an economy that has no use for it. There is already $1.8 trillion cash on corporate balance sheets, $2 trillion cash in money market mutual funds and over $1 trillion reserves in commercial banks-- a total of $4.8 trillion unused cash sitting silent. Creating no jobs, no consumer purchases.
The upshot will only drive down the dollar and drive up the price of gold, silver, platinum and other commodities. Thank David Rosenberg, the best informed, clearest thinker on Wall Street (Gluskin Sheff) for that strong sure view. Anyway, you missed the first 3% ride in commodities as the market began discounting QE2. last week.
QE2 will have a boomerang effect on the middle class. It will raise the price of wheat, sugar, coffee, poultry, beef, pork, raising their cost of living, reducing their disposable income. Just the opposite that Bernanke intends. Horrors!