St. Louis Fed President Says Fed Should Monetize More US Gov Debt

The Fed should resume purchases of Treasury securities if the economy slows and prices fall, Bullard said in a research paper released yesterday. Fed Chairman Ben S. Bernanke said on July 21 that central bankers “remain prepared” to act as needed to aid growth even as they get ready to raise interest rates eventually.

The data show today that the economy is weakening… if Bernanke follows Bullard’s advice (not that Bernanke isn’t thinking the same thing), we should see new purchases of US gov debt before year end… last report I saw was the Fed discussed expanding the balance sheet from the current $2.4T to $5T… keep in mind they have already tripled it from $800B to $2.4T since 2008.

Japan, a net exporter has a bid for its currency. That being said, Japan does face an incredible national debt at more than 200% of its GDP… the long term ramifications of this will be interesting to see play out… two major forces acting in opposite directions on its currency.

Japan’s currency has advanced 11 percent this year in the biggest gain among developed-world counterparts, according to Bloomberg Correlation-Weighted Currency Indices. The euro has dropped 7.7 percent, while the dollar is up 2.2 percent.

Japan’s Trade Surplus

The yen typically strengthens in times of financial turmoil because Japan’s trade surplus means the nation doesn’t have to rely on overseas lenders.



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