Fed Has Bought More U.S. Gov’t Debt This Year Than Treasury Has Issued

If the Fed continues to purchase $45 billion in additional federal debt each month in 2013 it will buy up another $540 billion in federal debt this year alone


The CBO currently estimates that the federal deficit for fiscal 2013 will be $845 billion. If the Fed were to buy debt at a pace of $540 billion a year, and the Treasury were to issue it at $845 billion per year, the Fed would be buying the equivalent of about 64 percent of all debt the government issued.

As recently as calendar year 2007, the total debt of the United States increased by only about $549 billion, or roughly equal to the amount of debt the Fed plans to buy this year.

Currency Wars Return, 1930s Style: Who Will Lose Out?

The U.K. was the first to leave the gold standard on September 19, 1931 due to painfully high unemployment. Sterling depreciated, setting off a volatile chain of events with the U.S., Norway, Sweden, France and Germany all following suit.

Remember, one country's weak currency is another country's strong one: it's a zero sum game. In the past, currency wars have led to protectionism and capital controls, as well as tariffs as countries seek to protect their industries. Look what happened in the 1930s and 1970s when the U.S. finally abandoned the gold standard and devalued the dollar.

Why Currency Wars Might Be Coming

The rush to cheapen the yen and the dollar, which has left the euro appreciating, is creating headaches for policymakers all over the world. The Brazilians are furious at the Americans, since it has increased the cost of exporting goods for them. They already have a weak form of capital controls.

Other policymakers have had to cut interest rates to weaken their currencies.

The worry: This could become a serious issue and undermine the global recovery.

Federal official refuses to testify about Fast and Furious

By William La Jeunesse Published January 20, 2012 | FoxNews.com The chief of the Criminal Division of the U.S. Attorney’s Office in Arizona is refusing to testify before Congress regarding Operation Fast and Furious, the federal gun-running scandal that sent U.S. weapons to Mexico. Patrick J. Cunningham informed the House Oversight Committee late Thursday through his attorney that he will use the Fifth Amendment protection. Cunningham was ordered Wednesday to appear before Chairman Darrell Issa and the House Oversight Committee regarding his role in the operation that sent more than 2,000 guns to the Sinaloa Cartel. Guns from the failed operation were found at the murder scene of Border Agent Brian Terry.

January 25, 2011: A cache of seized weapons used in the ATF gun-running operation 'Fast and Furious' is displayed at a news conference in Phoenix. The letter from Cunningham’s Washington DC attorney stunned congressional staff. Last week, Cunningham, the second highest ranking U.S. Attorney in Arizona, was scheduled to appear before Issa‘s committee voluntarily. Then, he declined and Issa issued a subpoena. Cunningham is represented by Tobin Romero of Williams and Connolly who is a specialist in white collar crime. In the letter, he suggests witnesses from the Department of Justice in Washington, who have spoken in support of Attorney General Eric Holder, are wrong or lying. “Department of Justice officials have reported to the Committee that my client relayed inaccurate information to the Department upon which it relied in preparing its initial response to Congress. If, as you claim, Department officials have blamed my client, they have blamed him unfairly,” the letter to Issa says. Romero claims Cunningham did nothing wrong and acted in good faith, but the Department of Justice in Washington is making him the fall guy, claiming he failed to accurately provide the Oversight Committee with information on the execution of Fast and Furious. "To avoid needless preparation by the Committee and its staff for a deposition next week, I am writing to advise you that my client is going to assert his constitutional privilege not to be compelled to be a witness against himself." Romero told Issa. This schism is the first big break in what has been a unified front in the government’s defense of itself in the gun-running scandal. Cunningham claims he is a victim of a conflict between two branches of government and will not be compelled to be a witnesses against himself, and make a statement that could be later used by a grand jury or special prosecutor to indict him on criminal charges. Read more: http://www.foxnews.com/politics/2012/01/20/federal-official-in-arizona-to-plead-fifth-and-not-answer-questions-on-furious/#ixzz1k2RN35Gb

Ben Bernanke: Bernanke: 4-5 Years Before 'Normal' Unemployment - CNBC

Ben Bernanke: Bernanke: 4-5 Years Before 'Normal' Unemployment - CNBC

Federal Reserve Chairman Ben Bernanke sketched a more optimistic view of the economy Friday but said the Fed's $600 billion bond-buying program is needed because unemployment will likely stay elevated for up to five more years.

Bernanke spoke an hour after the government released a disappointing employment report. Employers added only 103,000 jobs in December.

The unemployment rate fell to 9.4 percent partly because people gave up looking for jobs. Many economists had forecast much bigger job gains and were looking for a signal that businesses were stepping up hiring.

Asked about December's 103,000 job gains, Bernanke said if the pace of hiring doesn't increase, "we're not going to see sustained declines in the unemployment rate."

The Fed chief defended the central bank's move to buy $600 billion in Treasurys through June and gave no hint that it would change its course. The bond purchases are designed to boost the economy by lowering interest rates, encouraging spending and lifting stock prices.

The program has been criticized by Republicans in Congress and some Fed officials who contend it will do little to help the economy and could hurt it by unleashing inflation and speculative buying on Wall Street. China, Germany and Brazil complained it was really a scheme to push down the value of the dollar, giving U.S. exporters a competitive edge.

The Fed chief said the threat of deflation—a dangerous drop in prices, wages and in the values of homes and stocks -- and the potential for persistently high unemployment were sufficient reasons to launch the program.

Bernanke predicted that the overall pace of the economy will be "moderately stronger" this year. He said the Fed has seen "increased evidence that a self-sustaining recovery" is taking place.

Factories are cranking up production. The service sector is growing at its fastest pace in more than four years. Fewer people applied for unemployment benefits over the past month than in any other four-week period in more than two years.



Consumers are spending more freely, and a payroll tax cut is likely to boost their activity further. Tax cuts are also likely to lead businesses to expand and hire more.

But weakness in job growth could slow this momentum, Bernanke cautioned, especially if consumers spend less.

Bernanke said unemployment is likely to be around 8 percent two years from now.

Other threats to the economic outlook, Bernanke said, are:

—A depressed housing market, where growth in foreclosures could push down home prices even more.

— Deeper spending cuts and more layoffs from state and local governments.

— Rising gasoline prices, which now top $3 a gallon.

Bernanke also argued for Congress and the White House to come up with a long-term plan to reduce the government's trillion-plus-dollar budget deficits. However, he warned them not to slash spending or boost taxes now because the economy is too fragile.

President Barack Obama's debt commission at the end of last year failed to reach a consensus on a deficit-reduction plan. Over the coming decade, government deficits are estimated in the $10 trillion range.

Hiring Again: Where the Jobs
If Congress fails to come up with a reduction plan, the economy could be hurt, Bernanke said. Big deficits could force investors to demand more returns on government loans and interest rates could soar.

Sen. Jeff Sessions of Alabama, the highest ranking Republican on the committee and a fiscal conservative, expressed concern that the Fed's bond-buying program could spur inflation. And he wondered whether the Fed was simply printing money to cover the nation's deficits.

Bernanke countered that the program won't expand the amount of money in circulation in a significant way because banks aren't lending the money.

It's not a situation "where the Fed is dumping money into the economy," he said.