Ben Bernanke and the Federal Reserve put into place a policy whereby there will be the acquisition of $40 billion in mortgage-backed securities on a monthly basis until there is a sustainable improvement in the labor market. At least that's the theory behind the action.
The FOMC said in a statement:
"If the outlook for the labor market does not improve substantially, the committee will continue its purchase of agency mortgage-backed securities, undertake additional asset purchases, and employ its other policy tools as appropriate until such improvement is achieved in a context of price stability."
Also announced was the Fed would continue to have Operation Twist in effect until the end of 2012, as well as keep interest rates low through the middle of 2015.
After all of this is said and done, the most likely and predictable outcome will be an astounding and growing national debt which is already beyond the ability of Americans to pay.
And with no real positive impact on the economy coming from QE1 and QE2, there is no reason to believe anything different will come about from this latest round, which is likely to go on for years, as there's little hope of the economy rebounding in any significant manner, which means little in the way of new and sustainable job creation.
What will benefit is a number of commodities and some of the miners accompanying the sector. The U.S. dollar will now start to plunge in value against some of the major currencies.
As for the effect on the euro zone, it could get even worse there with the U.S. dollar falling, as they couldn't even do well on exports when the euro was weak against the dollar.
In reality, this is a disastrous decision, although investors rightly positioning themselves will do very well in the months ahead.head.