There is an absolute requirement for QE III for the Ponzi game to continue, or some form of QE that is not perceived as such by the electorate, because to call it such would be political suicide. Ben is caught in a trap of his own making, between the proverbial rock and a hard place. Something must happen in the second half of 2011.
The major holders of US debt, China, Japan, England or Russia, don't have any interest in dumping en-mass, their US Treasury Bonds, for fear of devaluing their holdings. Nor the oil rich Arab regimes of the Gulf, who sit on a mountain of Treasuries, representing years of oil supplied to the US.
Japan is a complete disaster and represents the most likely candidate to liquidate a large portion of their Treasuries. Russia has been slowly liquidating their holdings of Treasuries, as the Gulf States have recently been doing.
The international financial system is in such a state of weakness, as is the historic weakness of the US economy, that any sudden major shock will cause a catastrophic meltdown of the debt bubble, taking along with it the US dollar as well.
Ben is walking a tight rope, without a safety net, facing hungry tigers and being chased by angry bears! This Friday he will announce to the world what course the Fed will take in dealing with present financial circumstances. What he has to say will be his most important speech of his life. One misstep and... BOOM!