London, United Kingdom (PressExposure) August 11, 2010 -- “Sovereign-International” analysts say they fear that another round of quantitative easing from the US Federal Reserve would be tantamount to opening Pandora’s Box for the American economy.

The Fed is concerned that deflation will begin to increase the cost of servicing debt at a time when its ability as well as that of American homeowners and businesses to service debt depends heavily on the effects of inflation.

Despite spending $1.25 trillion of newly created money to buy up mortgage-backed securities and long-dated government treasuries, banks remain reluctant to lend to small businesses and individuals even though mortgage rates have dropped to historic lows.

“Sovereign-International” analysts do not believe that further QE will yield the results the Fed is looking for as, in the words of one, “The Fed has led the horse to water, but it can’t make the horse drink. People simply don’t feel confident taking on debt.”

The consensus is that further quantitative easing will only serve to fuel additional bubbles in equities and commodities and exert downward pressure on the value of the US dollar but Fed official, James Bullard, president of the St. Louis Fed, says it would energize the economy and stave off deflationary forces.

“Sovereign-International” said that neither the Fed nor Washington are likely to stand by and allow the economy to slip into another recession and that, one way or another, there would be more stimulus before the end of 2010.

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