They are screaming, like Bill Gross, that QE3 is coming on September 13.
Gold is now up nearly $40 to $1691 and 10-year yields down 8 bps to 1.55% although FX and stocks are much more tentative.
I re-read the Jackson Hole speech after some time to digest and I must come down on the side of QE3.
There is definitely some hemming and hawing in the speech but it concludes on a firmly dovish note.
Bernanke says there is “no net improvement in the unemployment rate since January” and later says “it is important to achieve further progress, particularly in the labor market.”
The stagnation of the labor market in particular is a grave concern not only because of the enormous suffering and waste of human talent it entails, but also because persistently high levels of unemployment will wreak structural damage on our economy that could last for many years.
He wraps up by saying the Fed will take “due account” of the uncertainties and limits of its tools but will do more.
If the employment and ISM numbers are in-line with recent data, I’m confident QE3 is coming.
