from Zero Hedge
In two days the entire world will learn if the Fed will do away with all pretense it is not a political agency, and despite a presidential election looking in less than two months, proceed with a third historic round of easing, which according to “experts” may range from nothing (yes, some actually see no point at all to further goosing banker bonuses and the AUM of the uber-wealthy which is all QE4 will achieve), to extension of the ZIRP language, to MBS Twist, to combined purchase of USTs and Agencies, either with a deadline, or open-ended. That pretty much rounds it up. No matter what the Fed does though, the reality is that 100% of Bernanke’s action, if not much more, has already been priced in, even though as we explained, Bernanke’s hands may actually be quite tied due to simple structural limitations in the bond market, in which the Fed is now a 30%+ active player, and approaching 70% in the long end. Perhaps a bigger question is will Bernanke step back from the trees and notice that the forest is less than 2 months from the presidential election, in essence making the Fed’s decision a political one in everyone’s mind, regardless if more easing was designed to have a political impact. To answer that, we look at what the Fed has done in the past in the period of 0-2 months before US presidential elections. The result, as Credit Suisse reports, is that “More often than not the policy move inside of the two-month window prior to the election has been an extension of the prior regime.” In other words, no transition from turbo-easing to hyper, mega easing. With that said, one must keep in mind that all historical precedents should really be thrown out of the window as never before in history has the Fed found itself at the Z/NIRP boundary, with a very limited arsenal of action, and with only prayer left that this time it will be different, and central planning will actually work for once.