Fed gambling on another trillion of QE to calm recession fears, slow loss of personal wealth

Consensus is building fast that the Federal Reserve will roll out a third round of quantitative easing, possibly as high as $1 trillion and likely by the end of January, economists say.

The Fed has already carried out two rounds of quantitative easing, in which it buys assets from banks with freshly printed money with the aim of steering the economy away from deflation and contraction.

The Federal Open Market Committee, which sets monetary policy, meets next Tuesday and Wednesday and a decision could come then.

While improving economic indicators had many believing a third round, known as QE3 wouldn’t be necessary, a slumping housing sector and the onset of recession in Europe may prove otherwise.

Home values may be falling and even bottoming out, but personal wealth remains battered from the recession, which keeps home prices from recovering and the economy remains stuck in the doldrums before contracting anew.

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