"On the border" with QE3

The recent testimony by Fed Chairman Bernanke suggests that more stimulus is on the border. (South of the Border is the place Bernanke worked as a youth.) The criteria for more stimulus has a set of markers: "loss of economic momentum, downside risks to forecast become pronounced, or if inflation seems likely to run below Committee's objectives". We are headed in the direction of hitting all of these markers.

This is what markets are waiting for. The hope is that there will be something new on  the monetary policy front given the addiction to QE needs more to have a significant impact. Once the QE looks to be ending the market sells-off in an effort as if it needs more to meet its addiction.

There are a number of choices for the Fed: more mortgage purchases, more dollar swap lines to shore up the Euro, lower rates on reserves held by the Fed, a relaxing of bank regulation. Unfortunately, many of these choices are more of the same.