The US bankers often go home to mommy and order a giant slosh of monetary inflation whenever in deep intractable trouble, like after the previous mistake in QE1 when ordering a giant slosh of monetary inflation. The USFed, led by the academic professor with no business experience, has ordered a fresh supply of gasoline from a lit fire hose, but he does so on a collapsing building. Bernanke has very erroneously diagnosed lack of liquidity within the system to be the underlying problem. He has prescribed a huge swath of ‘free money’ to be sent into the bond market as a solution. He has prescribed that cheap money continue to be delivered to the USEconomy. Bernanke has failed to notice the insolvency in banks, and has failed to notice that 0% has yet to prompt any revival in lending among banks. Bernanke is fighting INSOLVENCY with LIQUIDITY for a second time after learning nothing the first time.
The USTreasury 10-year yield has risen from a grand bond market dare, not at all from evidence of growth. Bond players dare the USFed to create another $1 trillion in new money. In no way does another lift in retail spending constitute a recovery. Household insolvency rises every month from worsening home loan balances. The USFed wants households to spend more on borrowed funds, yet they have depleted home equity and vanished income security. No, US bankers are confused with their wrecked financial engineering aftermath and the broad banking system insolvency that they refuse to acknowledge or discuss. Ever since the April 2009 decision by the USCongress to bless the falsified accounting practices by the Financial Accounting Standards Board, the big US banks have masked their ruined balance sheets, sold stock for their dead entities, and pretended to act as banks. Instead they are mere carry trade shells taking advantage of the USTreasury yield differentials, and storing the cash profits in the USFed, where it earns interest.