From Forbes, Charles Kadlec reports the crucial point, raised by U.S. Rep. David Schweikert (AZ) at last week’s House Fed policy hearing, that when QE2 ends in June interests rates will rise, meaning a huge increase in debt costs:
Today, the interest expense on the federal debt is being held artificially low by the Federal Reserve’s so-called “QE2″ policy and the global flight to quality triggered by the financial crisis of the past two years.At NRO, Larry Kudlow notes that growth projections are declining while inflation expectations are rising.
“QE2″ ends in June. Given the recent jump in producer and consumer prices, another round of quantitative easing is unlikely. Beginning in July, the Fed’s purchases of Treasury securities in the open market are likely to all but dry up. And, as rising inflation takes hold, it will be forced to raise short-term interest rates.
The flight to quality appears to be approaching an end as well. For example, PIMCO’s bellwether Total Return bond fund, managed by the fabled Bill Gross, last week announced that it had sold the last of its Treasury securities.
Interest rates thus are likely headed higher, which in turn will drive federal expenditures on servicing the debt higher as well.
On Forbes, Brian Domitrovic suggests monetary policy was better when it was controlled by markets rather than public servants.
At The Kudlow Report, Steve Forbes assesses the falling dollar:
From RCM, John Tamny critiques Fed official Bill Dudley’s claim that inflation isn’t rising because iPads prices are falling.
In Globe Asia, Steve Hanke argues that Basel III banking regulations will reduce the money supply and reduce growth.
At The Kudlow Report, Stephen Moore debates the debt:
On Forbes, Ralph Benko explains the Tea Party’s small government principles.
In The Washington Times, Richard Rahn rebuts Big Labor’s anti-trade arguments.