In a far-reaching conversation at the opening general session of the Schwab Impact conference yesterday, PIMCO's Bill Gross and Schwab's chief market strategist Liz Ann Sonders both expressed skepticism about the efficacy of any potential QE3.

Sonders, in particular, cited the damage to ordinary American consumers from the higher commodity prices triggered by the Federal Reserve's quantitative easing policy. What the economy needs is demand from consumers and companies, and Sonders noted that QE2 failed to stimulate consumer demand and in fact probably repressed it.

Nonetheless, Gross predicted that the Fed policy of ultra-low interest rates, which he called financial repression or a tax on savers, was likely to remain the default policy option of choice. Given that the optimal way to extricate the economy from its sluggish condition, growth, is unlikely to materialize, Gross believes it may be the best among several unattractive options.