The Federal Reserve has no more room cut interest rates.  About all it can do is to take the discount rate lower than the 0.75% but the target rate of 0.00% to 0.25% for Fed Funds is already a floor.  That leaves quantitative easing (QE) measures whereby the FOMC makes accommodative financial policies that have the same effect that lowering rates might hope to accomplish.  We have already had QE1 and now QE2.  The ‘operation twist’ where the FOMC went further out the yield curve to buy Treasuries was a light version of QE3.  So that was either QE-2.5 or QE3. 

In today’s annual outlook speech, Ben Bernanke has said that the FOMC is prepared to look at other actions to support the economy.  More importantly, Bernanke telegraphed that another round of easing is on the table but no formal decision has been made as of yet.

Is that QE3 or QE4?  Either way, Bernanke and friends are already introducing the United States to the same rate structure as Japan.  Now we just have to see what more forms of Utopia Juice they can cook up to serve the masses.  Hopefully it is not what they drank in Jonestown.

JON C. OGG