So it looks like the Fed is going ahead with QE3 with spending $40 Billion a month and it is apparently "open ended". Below is a story on the recent news.

The Fed said it will buy $40 billion of mortgages per month in an attempt to foster a nascent recovery in the real estate market. The purchases will be open-ended, meaning that they will continue until the Fed is satisfied that economic conditions, primarily in unemployment, improve.

 Enacting the third leg of quantitative easing will take the Fed's money creation past the $3 trillion level since it began the process in 2008.

 "The Committee is concerned that, without further policy accommodation, economic growth might not be strong enough to generate sustained improvement in labor market conditions," the Open Market Committee said in a statement.

 In addition, the Fed said it will continue its program of selling shorter-dated government debt and buying longer-term securities, a mechanism known as Operation Twist. It also will continue its policy of reinvesting principal payments from agency debt and mortgage-backed securities back into mortgages.

 The Fed left its funds rate unchanged at near-zero but offered one change in that regard, saying the rate would stay at "exceptionally low levels" until at least mid-2015.

 "These actions, which together will increase the Committee’s holdings of longer-term securities by about $85 billion each month through the end of the year, should put downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative," the Fed statement said.

 With a summertime rally pinned on hopes for aggressive central bank intervention — both in the U.S. and Europe — the Fed instead split the difference Thursday, offering a quantitative easing program the aggressiveness of which will depend on the strength of the recovery.

 The stock market, which had been slightly positive prior to the decision, shortly after 12:30 p.m., advanced while bond yields edged lower.

 "The language of its policy stimulus leaves us in little doubt that the central bank is trying hard to allay fears over the prospects for inflation, which it continues to see as a low likelihood, as well as its exit strategy," said Andrew Wilkinson, chief economic strategist at Miller Tabak in New York. "The Fed is going all out to say that easy money is here for a very long time. Will markets warm to its latest actions? We think so."

 Though the Fed is ostensibly politically independent, the decision comes at a ticklish time with the presidential election less than two months away.

 

 Washington conservatives have been critical of the central bank's money creation, which has caused its balance sheet to swell to $2.8 trillion. They worry that the growing money supply will lead to inflation, which has reared its head in food and energy prices but has remained tame through the broader economy.

 Bill Gross, who runs bond giant Pimco, said the new round of easing would take the Fed's balance sheet up to nearly $3.5 trillion if the purchases continue for a year.

 "That potentially is reflationary," he told CNBC. "We're just to have to see if it works."

 Faced with an unemployment rate stubbornly above 8 percent and other indicators showing only halting signs of recovery, the Fed was pressed into action by a market worried that the nascent recovery was on wobbly ground and needed more stimulus.

 Two previous rounds of QE had uneven effects on economic growth though they did manage to levitate stock prices by more than 100 percent from their March 2009 lows.

 Fed Chairman Ben Bernanke will explain the central bank's decision further at a 2:15 pm news conference.

I just read a great Wall-Street journal article about the hidden effects of QE too... it more or less explains my stance on it.

http://online.wsj.com/article/SB10000872396390443686004577639590237612020.html

Copy and Pasted because I believe WSJ goes behind paywalls after a day or so. Please read it from the site if you can though.

"Since mid-September of 2008, the Federal Reserve balance sheet has grown to $2,814 billion from $924 billion as it purchased massive amounts of U.S. Treasurys and mortgage backed securities. To finance those purchases the Fed increased currency and bank reserves (base money).

That kind of monetary expansion would normally be a harbinger of inflation. However, with banks holding excess reserves rather than lending them out—and with velocity (the rate at which money turns over generating national income) at a 50-year low and falling—the inflation rate has stayed close to the Fed's 2% target.

While the Fed considered its previous rounds of easing—QE1, QE2 and Operation Twist—the argument was consistently made that the cost of such actions was low because inflation was nowhere on the horizon. The same argument is now being made as the central bank contemplates QE3 during the Federal Open Market Committee meetings on Wednesday and Thursday.

Inflation is not, however, the only cost of these unconventional monetary interventions. As investors try to predict the timing and effect of Fed policy on financial markets and the economy, monetary policy adds to the climate of economic uncertainty and stasis already caused by current fiscal policy. There will be even greater costs when the economy begins to grow and the Fed, to prevent inflation, has to reverse course and sell bonds and securities to the public.

Since September 2008, the Fed has acquired $1.16 trillion of government securities—in fiscal year 2011 (Oct. 1, 2010-Sept. 30, 2011), the central bank bought 77% of all the additional debt issued by the Treasury. Aside from the monetary impact of these debt purchases, the Fed allowed the federal government to borrow a trillion dollars without raising the external debt of the Treasury and without having to pay net interest on that portion of the debt, since the central bank rebated the interest payments to the Treasury.

When the Fed must, in Chairman Ben Bernanke's words, begin "removing liquidity," by selling bonds, the external debt of the federal government will rise and the Treasury will then have to pay interest on that debt to the public. Selling a trillion dollars of Treasury bonds on the market—at the same time the government is running trillion-dollar annual deficits—will drive up interest rates, crowd out private-sector borrowers and impede the recovery. Debt-service costs to the Treasury will spiral as every 1% increase in federal borrowing costs add $100 billion to the annual budget deficit.

In addition, Operation Twist, by shortening the average maturity date of externally held debt, will require the Treasury to borrow more money sooner when the economy recovers and interest rates start to rise. This too will drive up interest costs and the deficit.

The same problems will occur as the Fed begins to sell its holdings of mortgage-backed securities to reduce the monetary base. When the Fed bought these securities, it may have marginally reduced mortgage interest rates. Selling them during a real recovery will likely cause mortgage rates to rise.

Proponents of QE3 argue that while the Fed's balance sheet must be reduced at some future time, it has the tools to minimize the impact on interest rates by slowing down the pace of the sales. But the Fed's ability to act has already been compromised by its pledge to maintain low interest rates through 2014. Having to time open-market sales to minimize interest-rate increases will further limit the Fed's ability to preserve price stability. In short, the Federal Reserve in future years will face significant constraints that are being forged now.

The Fed could raise the interest rate that it pays banks on reserves they hold in lieu of reducing its balance sheet. Where would the money come from? It has to come out of the money the Fed is currently paying the Treasury, driving up the federal budget deficit. How will taxpayers feel about subsidizing banks not to lend them money?

Rational decision making comes down to a comprehensive measure of cost and benefits. The Fed's effort to use monetary policy to overcome bad fiscal and regulatory policy long ago reached the point of diminishing returns. The benefits of a third round of quantitative easing will almost certainly be de minimis. But when economic growth does return, Fed actions will have to be reversed in an era of rising interest rates, and the marginal cost of a QE3 tomorrow will almost certainly be far greater than the marginal benefit today.

Someday, hopefully next year, the American economy will come back to life. Banks will begin to lend, the money supply will expand, and the velocity of money will rise. Unless the Fed responds by reducing its balance sheet, inflationary pressures will build rapidly.

At that point the cost of our current monetary policy will be all too clear. Like Mr. Obama's stimulus policy, Mr. Bernanke's monetary expansion will ultimately have to be paid for.

The Fed softened the recession by its decisive actions during the panic of 2008, but the marginal benefits of its subsequent policy have almost certainly been small. We may find the policies that had little positive impact on the recovery will have high costs indeed when they must be reversed in a full blown expansion."

It seems to me that the economy as a whole is waiting on something, at which point we'll see an explosion of both economic activity as that money is freed up, followed soon after by rapid inflation, but once groups are spending the money again, the inflation will be easier to tame.

i bought $5000 worth of silver about a week ago. QE3 made the price shoot way up. im happy in this regard.

If the money doesn't get into the economy, and it very likely isn't, you aren't going to get inflation.  Inflation can come from other things, but not the QE.  But, without getting into the economy, it isn't going to have a stimulative effect.  The money will likely float around in the paper assets arena where they will play their banker games.

Edit: Well buying up mortgages is going to make the Fed the owner of all the housing property in America.  Next up, they become your landlord.

People believing that inflation is going to happen drives them to buy silver, thus the price shoots way up.  So, it ends up with a Ponzi aspect to it, and one of self-fullfilling prophesy.

Short-term, sure. Long term, no.

Look at what $1 worth of silver money would buy you 50 years ago vs. today.

The economy isn't waiting on anything.

The banks are hunkering down until their capital stops diminishing/returns to growth. Until that point, you can print up all the money in the world, the banks won't use it. How dow we get capital values to turn around? Well, first off, we need to let it bottom out, rather than using all this "stimulus" and such to delay the inevitable.

First off... groups spending money makes inflation harder to tame.  It's what naturally causes price infaltion.

More money after fewer goods.  That's why there hasn't been huge inflation except for food, gas and other needs.  No consumer demand.

Secondly, what the economy is waiting for is said consumer demand.

The government keeps stimulating the economy, however it's not doing anything because all that money is being used to pay off bills and save up because know the economy is fucked up.

The savings rate is way up.

Essentially, the economy is waiting for consumer demand, and consumer demand is waiting for the economy.  

It's why all these stimulus actions and fed actions have been mostly useless. 

There are only two things that will break this cycle... that I can see at least.

1)  People saying "this is the economy we're stuck with, it's now or never for that flat screen."  This is actually hurt by stimulus spending.

2) Massive Demand created by a big consumer product or two that EVERYBODY needs to have.

As it is, all stimulus spending is going to do is benefit banks and people who own stocks, while regular people are left out in the cold... I mean with the record interest rates set for keeping money, and lending rates so low, banks aren't finding much they like.

Oh... and it's also worth noting. This QE isn't targeted at government bonds. It's mostly targeted at "Mortgage Based Securities."

So, they are responding to an economic downturn created by mortgage based securities being artificially over valued by buying mortgage based securities that were overvalued because banks were forced to buy them so people could get loans... to artificially over value them so people can get loans to buy homes.