by David Engstrom:
"In the time between Jackson Hole and the expiration of QE2, markets soared. The S&P climbed 28%. Then QE2 ended and the markets threatened another crash. Printed money had become to the markets what a drug is to an addict. Take away the drug and a crash is inevitable. Again the Fed was cornered.
"In response, the Fed made an August 9, 2011 announcement of plans to hold interest rates at already historic lows. Shortly after, on September 21, it announced the Twist – a fancy term for “refi”. The quick successive moves were intended to produce similar rescuing effects on the markets as quantitative easing without having to print more money. Instead, confidence failed to be restored as today’s markets flounder in volatility. Hence, rumors of QE3 have surfaced.
"It’s clear, neither the markets or the Fed like a strong dollar. A strong dollar inhibits profits on exports. Hence more money printing to counter this effect and make it easier for the U.S. to pay foreign debt. The goal is to pay off foreign debt with dollars that are worth less than those borrowed. Sorry China.
"If I were to make a call, I would say that soon the Fed will announce some “hula hoop” strategy to print more money and somehow route it to Europe. Then Europe won’t collapse, the Euro will actually get a boost because we printed more dollars and the world will be saved..."