Last week the FOMC released minutes from its most recent meeting.  Members indicated they are ready to implement additionalQE should expected economic weakness come to fruition.

Expectations for economic weakness are predicated upon expiration of the “Bush tax cuts” (due to expire 12/31/12) and the mandatory spending cuts set to kick in as a result of the “debt ceiling” deal reached last August.

So The Fed is out in front on this issue.  Great.  Being proactive is a good thing.  The problem is, once again, the solution is a non-starter and comes with enormous side effects.

The goal of QE is to lower interest rates.  The theory goes that decreased cost of funds will spur demand for borrowing.  The issue, however, is that rates aren’t too high.  Rates have been incredibly low for quite a while.  Is there anyone really putting off a home purchase because mortgage rates are too high?  Gimme a break!

Consumer borrowing demand is off because households have been busy paying down debt – not taking on new debt.  Commercial borrowing is down because businesses have been under attack from inside the Beltway.  Regulations, taxes and public demonizing have forced businesses to stash cash under the proverbial mattress rather than invest in jobs, plant and equipment.

Even if loan demand increases banks are in no rush to lend when they face increasing capital requirements, a fragile housing market and wide ranging uncertainty from the outcome of the November elections to the ability of the EU to get its financial house in order.

The Fed giving us QE3 won’t result in economic stimulus.  Instead it’ll further devalue the Dollar and set us up for future inflation.

Someone please take away their DeLorean!!!