QE2 will not warm up the already cold U.S. economy but to heat up the already hot economies in the world, like China’s economy, after the excessive liquidity fly around the world instead stay inside the U.S. QE2 will not be working because it flushes liquidity to the wrong side by the reasons that I have written before.
But what will the QE2 do? My answer is that QE2 will save the banks facing the coming foreclosure peak. That is the only thing the Fed cares. To save the economy as Fed claimed, in my opinion, is just a ploy or excuse for its true intention that is to save the bank. But we should understand the Fed represents the benefits of all banks. That is why it is called Central Bank. By the same reasons, it is not surprising for the Fed to say “the banks are too big to fail” to American people and to say “the U.S. is too big to fail” to the world.