Note to "Bad news is good news"

No matter how strongly I believe that further quantitative easing will not help the U.S. economy move forwards, this does not mean the Fed will not engage in QE2, unfortunately. I believe they have gone down a road and now cannot turn back, because:

• Markets have priced in a large amount of possible further easing. Announcing no or only little QE2 will shock the markets, but in the wrong direction (stocks, gold and commodities will decline);
• The first round of QE helped (although back then loose monetary policy served the completely different purpose of providing liquidity to a system in need of liquidity);
• With fiscal policy offering little help, the Fed must do (rather: try to do) something (it's in their mandate);
• Future disadvantages to QE2 are far away, and very much unknown (unknown also are the benefits, but hey...), and;
• Bernanke is in favour of QE2, and so are most Fed members (and Krugman)

With this in mind, I think it is just much more likely the Fed will announce on 2-3 November a shocking package of purchases of government bonds and private assets.