SOS QE2

First we need to take a look at QE1 and what happened.

From Sept 2008 to June 2010

• Fed balance sheet increased USD2.4 trillion
• Out of which USD1.4 trillion from "mortgage assets" purchase
• And the balance USD1.0 trillion from increase in "excess reserve"
• in the same period, bank credit contracted USD296 billion, after 63 years of bank credit expansion up to Sept 2008
• Fed has USD918 trillion of assets (mainly Treasurys), today, it is less than 50%, first time in history

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Will QE2 be a success?