London, United Kingdom (PressExposure) July 01, 2010 -- “Sovereign-International” said that the US Federal Reserve is nigh on powerless to prevent a double-dip recession in the world’s biggest economy.

After slashing interest rates to near-zero and purchasing over a trillion dollars of mortgage-backed securities and government bonds, both the real estate and jobs markets remain stubbornly subdued.

Although the housing market accounts for only a small part of the country’s economy, a home remains the largest asset that most Americans have and, with the ability to release equity from property to fund consumerism largely a thing of the past, it is unlikely that they will be returning to old ways any time soon.

“Sovereign-International” told delegates at a recent convention that the Federal Reserve could restart quantitative easing in order to flood the economy with liquidity but such a policy would almost certainly result in a wholesale run on the dollar and run the risk of stoking bubbles in equity markets which would eventually burst.

“The Federal Reserve may be at the point where it simply has to sit back and let the economy fix itself” said one speaker. “It has done everything that can be expected of it and to sanction additional quantitative easing would send the wrong type of signal to markets”.

http://www.federalreserve.gov/aboutthefed/default.htm

“Any additional stimulus will have to be fiscal but the government should not over-estimate the bond market’s appetite for US debt. The low yields the US is getting away with paying at the moment could soar at any time leaving the Federal Reserve as the buyer of last resort and inflation as the outcome”, the “Sovereign-International” delegate concluded.

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