How long is QE3 going to last? If you listen to the Fed, QE3 could go on for infinity or until the unemployment rate gets down below 7%. But what happens then? If we get below 7% and then pull liquidity from the system, the rate could go back up above 7%. So we will have to hold onto this policy until we are well below 7%. Even then, we can only reverse the increase in Fed balances slowly. If rates start to rise, will more buying have to be undertaken? Again the policy may have to continue. The result is that there is no clear end game for QE3 and this is scary.
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