The uncertainty these factors create has consumers and businesses more nervous than ever, experts say, which makes them more unlikely to spend or invest in such a volatile environment. That's a phenomenon no amount of quantitative easing or low interest rates can solve. "Monetary policy should help economic activity, but right now it's just not working," LeBas says. That's because the money the Fed has been pumping into the economy has been going right back into their coffers, he says. "Banks are taking that cash and just re-depositing it with the Fed. It's not that banks don't want to loan money, it's because they can't. There's very little loan demand out there from consumers and businesses."
Scars from the financial crisis are still visible, with many Americans either too scared to borrow because they've been burned in the past, or because they've effectively priced themselves out of new loans by defaulting on their mortgages.
"It's almost like the Fed is sitting here trying to start a car that doesn't have any gas in it," LeBas says. "You can go at it all you want, it's just not going to have much effect."
On the surface, the Fed laid the groundwork for more intervention in its August meeting, pledging to keep interest rates low for the foreseeable future. Economists say that will have a similar effect as quantitative easing—lowering longer-term interest rates to stimulate borrowing—without further inflating the Fed's balance sheets. Nevertheless, experts don't expect the Fed to come to the rescue anytime soon.
"If you want to do a QE3, you don't do it until the situation is dire enough for it to have an impact, because on the margin you're upping the ante every time you do it," Swonk says.