$$ QE 2.0?

The FOMC meets on Tuesday.  Speculation persists that the Fed will announce a new round of quantitative easing at the meeting.  Ambrose Evans-Pritchard examines the topic in today's London Telegraph.  He concludes:

"Alabama Senator Richard Shelby has blocked the appointment of MIT professor Peter Diamond to the Fed Board, ostensibly because he is a labour expert rather than a monetary economist but in reality because he is a dove in the ever-more bitter and polarised dispute over QE.

The Senate has delayed confirmation of all three appointees for the board, who all happen to be doves and allies of Fed chairman Ben Bernanke. The Fed is in limbo until mid-September. So the regional [Fed chief] hawks who so much misjudged matters in 2008 [when the Fed only managed one 25 basis point Fed funds rate cut as America burned between March 19 and October 7, 2008] have unusual voting weight, and now they have a commodity spike as well to rationalise their Calvinist preferences.

Whatever Dr. Bernanke wants to do this week - and I suspect he is eyeing the $5 trillion button lovingly - he cannot risk dissent from three Fed chiefs: one yes, two maybe, but not three. He faces a populist revolt from the Tea Party movement, with its adherents in Congress and the commentariat. And China simply hates QE, which may or may not be rational but cannot be ignored.

Global markets have already priced in the next QE bail-out, banking the "Bernanke Put" as if it were a done deal. We will find out on Tuesday if life is really that simple."