Handipcapping QE3: What Will It Take to Move Bernanke?


In one short, self-damning statement, New York Senator Charles Schumer's plea to Ben Bernanke to "get to work, Mr Chairman," not only concedes that Congress is inept at fixing the country's financial quagmire, but it has also heightened the debate around the pros, cons, and triggers that should be met if the Fed is to, indeed, inject more money into the system to stimulate the economy.

In two days of testimony before Senate and House Committees, Bernanke refused to be pinned down. He smartly avoided taking up Senator Schumer's challenge, gave no specifics, and stuck largely to a well-worn script that the Fed stands ready to act if conditions warrant.

"It is in [Bernanke's] interest to stay concealed in order to keep his options open," says Jason Pride, Director of Investment Strategy at Glenmede, in the attached clip.

Without a doubt. But it is clearly in Pride's interest, and all investors, to determine what actual conditions would be needed to move Bernanke and the FOMC to serve up another round of stimulus.

From Pride's purview, while he concedes the economy is clearly weak, he says it's probably "not scary enough" yet to garner more action. However, should GDP and/or hiring deteriorate further, he says, that'd do it.

"Once you start dipping down below 1% [GDP], that's when you'd probably see his reaction," he says, adding that ''an upward creep in the unemployment rate" would also trigger QE3 or something like it.

To be fair, back in April, Bernanke was gloomy before gloomy was cool and hasn't really changed his tone much in the 4 months since, though the Fed's forecast was cut in June. For all his efforts to remain independent, apolitical, and immune from election year influence, the fact is, no matter when he acts — or doesn't act — a sizable swath of critics will be unhappy.

"It's stressful. People don't like it. They don't like to see the size of the [Fed's] balance sheet, but it's actually the right action," Pride concludes.

To ease or not to ease? That may be the question of the day, but it's the results of that effort that really need to be debated.

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