QE 3 - with equities presently not reflecting doom and gloom , how does the Fed justify a robust QE 3 at this time , especially after the Twist was recently extended through the end of 2012 ? As far as the ECB goes , Draghi will be damned whichever way he chooses to go on Thursday .....

http://www.zerohedge.com/news/did-market-remove-its-own-qe-punchbowl

Did The Market Remove Its Own QE Punchbowl?

Submitted by Tyler Durden on 07/29/2012 17:46 -0400

• Ben Bernanke
 
• Ben Bernanke
 
• Kool-Aid
 
• Monetary Policy
 
• Reality
 
• Ron Paul

There are only three words that send a chill down the spine of Ben Bernanke - Ron, Paul, and Deflation. His life's work is devoted to the avoidance-at-all-costs of the latter (and probably the former in reality). As we discussed here two weeks ago, his actions in extreme monetary policy have all occurred at periods when the market's expectations of future rapid de- or dis-inflation have increased rapidly. As we noted then: without inflation break-evens dropping, the Bernanke put will not arrive; but the market in its infinitely efficient wisdom has created a self-defeating spiral of BTFD reflexive front-running on any rapid spike down in future inflation expectations - which implicitly sparks a non-dis-inflationary reaction and removes Bernanke's punchbowl for another day. This has occurred 4 times this year - with this week's early plunge being caught by Draghi and Hilsenrath - and with inflation break-evens almost at their highest in 10 months, it would appear the 'desperate-not-to-miss-the-life-giving-rally' market just removed its own blood supply.

Each time the inflation break-evens have cracked down hard towards 2.0%, Bernanke has stepped up bowl-in-hand and ladled out the yummy QE Kool-Aid; 2012 has seen 4 'mini-spikes' which have all been triggers for responsive equity buying to front-run Ben's-Bowl.But as is clear, the more this occurs, the less likely the bowl is to actually appear!