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February 23, 2011

Inflation Building, Fed Should Back Off: LaVorgna

Filed under: Uncategorized — bigcapital @ 12:22 am
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Inflation Building, Fed Should Back Off: LaVorgna

As government economists and Fed apologists continue to dismiss inflation pressures, the fear that easy money and commodity pressures are about to come home to roost is building.

While Michael Pento at Euro Pacific Capital and a handful of others have been pounding the table about inflation ever since the Federal Reserve began quantitative easing, the sentiment is beginning to spread.

The latest on board is Joe LaVorgna, chief US economist at Deutsche Bank, who warns in a note sent to clients Friday that “inflation pressures are inflating.”

The threat is two-pronged: On one hand this week’s producer and consumer price numbers show pressures are building in the crude, or initial, price pipeline that will spread to intermediate and finished products in the months ahead.

On the other hand is “energy inflation contagion,” in which surging prices in that space “have shown a significant capacity to breed inflation contagion among related categories and have destabilized inflation expectations.”

Taking both threats into consideration, LaVorgna posits that the Fed should reconsider completing the entire $600 billion of Treasury buys it has planned for the second leg of QE.

Unless the brakes are put on, LaVorgna argues that core finished PPI prices will increase at an annualized 4 percent rate, and he concedes that if his calculations are wrong they are on the low side.

Finally, he warns against the pervasive mindset that commodity price increases will not cause so-called “pass-through” costs into the broader economy. The rise in CPI and PPI comes as manufacturing activity and capacity are rising, as opposed to the last bout of commodity-induced inflation when the economy was shrinking.

An excerpt from the LaVorgna note:

“We believe the rise in commodity prices is significant, because it is occurring alongside robust factory activity and a general strengthening in underlying domestic demand—a crucial difference from the 2008 run-up in commodities, when the factory sector was shrinking and demand was slowing. Therefore, monetary policymakers should be cognizant of the pipeline pressure brewing in the PPI.

“The risk is that an overstay of aggressively accommodative monetary policy could lead to even larger gains in retail goods prices down the road—the Catch 22 of Fed folks worried that higher commodities will crimp demand. Rather it is ample demand that is pushing commodities higher. Consequently, as long as monetary policy remains extraordinarily accommodative, thereby further boosting demand, we expect these trends to persist if not become more durable.”

.

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Dollar May Appreciate to 1.0067 Swiss Francs

Dollar May Appreciate to 1.0067 Swiss Francs: Technical Analysis

The dollar may reverse last week’s decline and rally 6 percent to its December high against the Swiss franc, Commerzbank AG said, citing technical indicators.

“Longer-term, we target 1.0067” Swiss francs per dollar, Karen Jones, head of fixed-income, commodity and currency technical analysis at Commerzbank in London, wrote in a report today. The exchange rate reached that level on Dec. 1.

The dollar strengthened 0.3 percent to 94.78 Swiss centimes at 12:30 p.m. today in London. The greenback slumped almost 3 percent against the franc last week and sank to 94.25 earlier today, the weakest level since Feb. 3, Bloomberg data show.

“We would allow the slide to continue to 0.9425, from where we would favor recovery,” Jones wrote. That’s the 78.6 percent Fibonacci retracement of the rally seen in February, Jones wrote.

The dollar may test resistance at around 97.74 centimes, she said. Those levels represent the 61.8 percent Fibonacci retracement of the move down from December and the high from Jan. 11, according to data compiled by Bloomberg.

Fibonacci analysis is based on the theory that prices rise or fall by certain percentages after reaching a high or low. Resistance and support levels are areas on a chart where technical analysts anticipate orders to sell or buy, respectively, a currency and its related instruments

Fed’s Fisher Says More Stimulus Unnecessary

Fed’s Fisher Says More Stimulus Unnecessary

(RTTNews) – A top Federal Reserve official declared on Thursday that we would not back more monetary easing when the Fed’s $600 billion quantitative easing program winds to a close.

Richard Fisher, President of the Federal Reserve Bank of Dallas, was quoted as saying that he could not foresee any circumstances that would warrant more stimulus and suggested that the central bank should turn its attention to unwinding support.

Fisher’s comments contrast with those made by the Chicago Fed President Charles Evans, who backed the Fed’s extremely loose monetary policy and assured that it had the tools to tighten quickly if needed should inflation rise faster than expected

February 2, 2011

Bernanke: The Dollar System Is Flawed

Filed under: Uncategorized — bigcapital @ 9:18 am
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Bernanke: The Dollar System Is Flawed

Federal Reserve Chairman Ben Bernanke’s speech in Frankfurt may be one of the most important and underreported events since America abandoned the gold standard. In it, he said the dollar standard was flawed and that America’s trade deficit was imperiling America.

 “[I]t would be desirable for the global community, over time, to devise [a new] international monetary system,” he said.

 Never before has a Fed chairman made such an admission. Never before has one ever disparaged his own currency in such a way.

“The speech was a radical departure from the status quo and a major signal for a looming policy change. It means that trade war is virtually guaranteed and the dollar will soon be devalued. Dramatic global economic upheaval is on the way. “

 On November 19, Ben Bernanke told a room full of bankers in Frankfurt, Germany, that the world’s sense of common purpose had waned. Tensions among nations over economic policies are intensifying, he said. It threatens the world’s ability to find a solution.

 U.S. unemployment rates are high, he told the gathering, and given the slow pace of economic growth, likely to remain so. Approximately 8.5 million jobs have been lost so far, and when you take into account population growth, the size of the employment gap is even larger, he said.

 Unemployment may get even worse before it gets better.

 “In sum, on its current economic trajectory the United Sates runs the risk of seeing millions of workers unemployed or underemployed for many years,” lamented Bernanke. “As a society, we should find that outcome unacceptable.”

 In an effort to win European allies, America’s most powerful banker then went on the attack—blaming China for causing much of the economic and trade imbalances destabilizing the current dollar-centric economic order and threatening the world’s economy.

 China is manipulating the market to keep its currency undervalued, he charged. This has led to imbalances.

 Each month China sells tens of billions of dollars more worth of goods and services to America than it purchases in return. Many American economists claim this is because of China’s undervalued currency, which makes Chinese goods less expensive in America and American goods more expensive in China.

 Coupled with China’s low-wage, low-taxation, low-regulatory, non-union environment, resulting in the relocation of millions of American jobs overseas, China has received a huge economic boost at America’s expense.

 This is a primary reason nations like China have fully recovered from the recession while America is still mired in it, noted Bernanke. America can no longer afford to let China drain the U.S. economy.

But what to do about it?

 “As currently constituted, the international monetary system has a structural flaw,” said America’s chief banker. The dollar system is broken. “It lacks a mechanism, market based or otherwise, to induce needed adjustments by surplus countries, which can result in persistent imbalances” (emphasis mine throughout).

“In the meantime, without such a system in place, the countries of the world must recognize their collective responsibility for bringing about the rebalancing required to preserve global economic stability and prosperity.”

 Thus Bernanke told his German audience to prepare for “market-based or otherwise” unorthodox—even radical—action by the Fed to try and force China to revalue its currency and rebalance the global economy.

 The “flaw” has been declared. But what is Bernanke going to do?

 “Bernanke is alerting the world to the most important shift in U.S. trade policy in more than a generation,” writes economic analyst and author Richard Duncan. “The world has been put on notice that the United States will take steps to correct this defect and the destabilizing trade imbalances it permits.”

 “If the flaw cannot be corrected through international coordination, then unilateral actions by the United Sates should be anticipated,” Duncan warns.

 And if history is a guide, that means tariffs and trade duties.

 The first major shots of trade war may be about to be fired—and the Fed has just given its blessing. If you look back on the 1930s and that disastrous time period, protectionism is lethally contagious and predictable. Global trade and commerce will contract. Import prices will rise. Unemployment will skyrocket. And that is just for starters.

 During the Great Depression, America was not burdened under record debt. The economy entered that age of trade warfare from a position of strength, and still the economy got ruthlessly battered.

 A trade-war-induced depression today would potentially be far worse—and not just because the United States has become the greatest debtor nation in all history, but because this time, the credibility of America’s government, its central bank and its currency, are all now in question.

 Besides tariffs, Mr. Bernanke’s declaration that the international monetary system is broken also means the Fed will engage in as much “quantitative easing” as necessary to compensate for what he sees as its “structural flaws.”

 During the G-20 meeting in South Korea two weeks ago, President Obama and Treasury Secretary Timothy Geithner were forced to defend the Federal Reserve’s decision to print dollars to finance government spending and depreciate the value of the dollar.

 Foreign nations saw it as a way for America to renege on its debts.

 Bernanke’s Frankfurt defense of the Fed’s “quantitative easing” will do little to reverse that sentiment. “Fully aware of the important role that the dollar plays in the international monetary and financial system, the [Fed] believes that the best way to continue to deliver the strong economic fundamentals that underpin the value of the dollar, as well as to support the global recovery, is through policies that lead to a resumption of robust growth in the context of price stability in the United States,” Bernanke said.

 In order for America to support the value of the dollar, it will devalue it, said Bernanke. The incongruity is palpable—and surely wasn’t lost on America’s bond holders. Every time the Federal Reserve hits the “print” button, creating money out of thin air, it devalues the dollars in existence. America’s lenders (of which the Chinese are the largest) have been put on notice that they will be paid back in depreciated dollars.

 Be prepared for more quantitative easing—or, as it has become known overseas, quantitative fleecing.

 And be prepared for the Federal Reserve’s antics to succeed all too well.

 Foreign nations, and America’s foreign creditors, grow more dissatisfied with the dollar as the world’s reserve currency every day. The move to adopt a new reserve currency system is gaining momentum. When this happens, the Federal Reserve will get a whole lot more international cooperation in meeting its goals than it could have ever wanted.

 The Fed won’t be trying to devalue the dollar anymore—it will be doing everything it can to prop it up.

 Unfortunately, with faith in the dollar broken, the government unable to borrow money and a global trade war ravaging the U.S. economy, America will pine for the structurally “flawed” but comparatively good old days.

 “The speech was a radical departure from the status quo and a major signal for a looming policy change. It means that trade war is virtually guaranteed and the dollar will soon be devalued. Dramatic global economic upheaval is on the way.”

– MARKET TALK –

January 8, 2011

Surprise jobs surge boosts U.S economic outlook 2011

Filed under: Uncategorized — bigcapital @ 2:17 am
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Surprise jobs surge boosts U.S economic outlook 2011

(Reuters) – A surprise surge in private-sector employment last month to its highest level on record provided the most bullish signal in months that the U.S. economy is on the mend.

Private employers added 297,000 jobs in December, triple the median estimate by economists and up from the gain of 92,000 in November, an ADP Employer Services report, whose data goes back to 2000, showed on Wednesday.

The report undercut the prices of the U.S. Treasury securities, and helped the U.S. dollar gain against the yen and the euro. U.S. stocks opened lower though they did pare losses after the jobs news.

“Sometimes numbers come as bolts from the blue; this is one of them,” said Ian Shepherdson, chief U.S. economist at High Frequency Economics.

“Nothing in any other indicators of the state of the labor market last month — jobless claims, help wanted, surveys — suggested anything like this was remotely likely.”

ISM’s index on the services sector also came in better than analysts expected, though the index’s employment component was a touch weak. Read about ISM services index.

“The data today still leaves an impression that a U.S. upside growth surprise in 2011 needs fresh assessment,” said Alan Ruskin, global head of G10 FX strategy at Deutsche Bank.

Macroeconomic Advisers Chairman Joel Prakken noted seasonal factors may have boosted the December numbers but said growth in employment was “comfortably into positive territory and seems to be accelerating.”

http://marketpin.blogspot.com/

December 30, 2010

The Federal Want To Pressure Down U.S Dollar Worldwide

Filed under: Uncategorized — bigcapital @ 9:23 am
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The Federal Want To Pressure Down U.S Dollar Worldwide

There is a saying in the investment business, “don’t fight the Fed.”

Fed Swap Lines Purposely Keeping Dollar Weak

Central banks provided two pieces of market supportive news in the past 48 hours.

China announced its intent to buy Portuguese bonds, and the Federal Reserve extended its “swap lines” deep into 2011:

# China Ready to Buy Up to $6.6B in Portugal Debt (Reuters : http://www.reuters.com/article/idUSTRE6BL0Y220101222 )

# Fed Extends USD Swaps With Major Central Banks (Reuters : http://www.reuters.com/article/idUSTRE6BK3PS20101221 )

Via Reuters, the swap lines, at first set to expire next month, will now run til August 1st.

The lines were first opened to the ECB and SNB — the European and Swiss central banks respectively — and were later expanded to multiple additional central banks, including those of Sweden, Mexico and Brazil.

The August extension applies to the Fed’s counterparts in Europe, Japan, Canada, England and Switzerland.

So why is the Fed doing this? Straight from the horse’s mouth (official Fed statement):

“[The swap lines] are designed to improve liquidity conditions in global money markets and to minimize the risk that strains abroad could spread to U.S. markets.”

That’s the official justification. A between the lines reading is slightly more self serving: The Fed wants to keep the dollar weak — or otherwise keep it from rising too much.

As you can see, from 2002 onward the $USD had been declining — a trend perceived as good for everyone. As Americans gorged on “stuff,” the vendor finance arrangements put in place by China and Middle East oil exporters allowed the party to continue unabated.

Long term interest rates were kept low via the recycling of $USD back into treasury bonds, in turn keeping mortgage rates low and perpetuating the housing bubble. Meanwhile many emerging markets enjoyed rapid growth — courtesy of a binging U.S. consumer — as the leverage and credit boom radiated outward.

But then, as things fell apart in 2008, the $USD saw a dramatic surge. A wave of panic swept the globe as the supernova debt boom collapsed. Trillions of dollars in credit flows evaporated, and American investors effectively “short” dollars (via overseas investments and ‘carry trade” type arrangements) had to cover with a vengeance.

As the chart shows, the $USD saw another upward surge in early 2010, first on China fears, and then eurozone sovereign debt fears as the Greek situation ignited. (This is when the Economist’s Acropolis Now cover was published — a keepsake to be sure.)

So, as you can guess, one of the many fears keeping Ben Bernanke awake at night is the possibility of a surging $USD.

Not only is the dollar a “risk-off” fulcrum, balanced against “risk on” for all other paper asset classes, a rising buck is also a political headache for the Obama White House and other American interests seeking a U.S. export revival.

So, back to those swap lines. Why and how would they be an attempt to keep the dollar down?

Well, first consider what a swap line actually is. From the Federal Reserve website:

In general, these swaps involve two transactions. When a foreign central bank draws on its swap line with the Federal Reserve, the foreign central bank sells a specified amount of its currency to the Federal Reserve in exchange for dollars at the prevailing market exchange rate. The Federal Reserve holds the foreign currency in an account at the foreign central bank. The dollars that the Federal Reserve provides are deposited in an account that the foreign central bank maintains at the Federal Reserve Bank of New York. At the same time, the Federal Reserve and the foreign central bank enter into a binding agreement for a second transaction that obligates the foreign central bank to buy back its currency on a specified future date at the same exchange rate. The second transaction unwinds the first. At the conclusion of the second transaction, the foreign central bank pays interest, at a market-based rate, to the Federal Reserve. Dollar liquidity swaps have maturities ranging from overnight to three months.

In layman’s terms, we can think of a swap line as a standing guarantee of U.S. dollar liquidity. If you (as a central banker) ever need greenbacks in a pinch, you know you’ll be able to procure them instantly, no matter how “tight” the open market may be.

This standing guarantee reduces the odds of another violent $USD spike of the type we saw in late 2008. In a way, one can think of it as “short squeeze insurance.”

The many players around the world who are “short” U.S. dollars — by way of lending arrangements denominated in dollars and so on — have spiking dollar risk implicit in their positioning.

What the Fed has essentially said to these players is, “It’s okay for you to keep borrowing in dollars, because in the event of a new liquidity crisis we will create accessible dollars for you (via the channel of your local CB).”

Consider, too, the conditions under which all these central banks would be pushed to draw on their $USD swap lines at the same time.

By definition, these would be crisis conditions in which availability of $USD was scarce relative to near-term surging demand.

In such conditions, the Federal Reserve would have to create more dollars to meet existing outsized demand (as crisis-driven preferences for holding $USD, or covering short $USD obligations, would create a shortage).

So the liquidity promise is also a sort of printing-press promise: In the event of another crisis, the Fed will be on its toes and ready to “print” however much fresh $USD the world needs.

The really neat trick is, simply in making this promise, the Federal Reserve can achieve its aim of keeping the $USD down. This effect is produced even without the Fed doing anything.

How? Simple:

* The Fed has promised $USD liquidity will be there “if needed.”
* This promise can be “taken to the bank” — literally.
* Commercial institutions can thus rest easier with short-dollar liabilities.
* To wit, whether one is a bank, a commercial operator or a speculator, it’s very tempting to borrow in $USD these days — to leverage the greenback via some form of debt arrangement and participate in the “carry trade.”

But this move could also be considered risky due to the possibility of carry trade reversal and crisis-driven supply/demand crunch … and so, with the extension of the Fed swap lines, Uncle Ben has stepped up and said “Hey, no problem, carry trade away — we’ll be there in a tight spot (via printing press) to provide liquidity for you.”

And so the dollar stays suppressed, and everyone stays happy (apart from those pesky “non-core” inflation watchers, and anyone else feeling a cost of living crunch).

December 2, 2010

Australia commodity index hits record high in Nov – RBA

Filed under: Uncategorized — bigcapital @ 8:31 am
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Australia commodity index hits record high in Nov – RBA

 SYDNEY, Dec 1 (Reuters) – The Reserve Bank of Australia’s (RBA) index of commodity prices rose 0.9 percent in November, from October, to reach a fresh record high in a favourable omen for export earnings.

 The index was up 44 percent in special drawing right (SDR) terms, compared to November last year. The index reading of 121.3 surpassed the August peak of 121.1.

 In Australian dollar terms the index fell by 0.5 percent in November, but was up 31 percent for the year. The index also hit a record high in U.S. dollar terms, to be up 41 percent on November last year.

 Much of the rise in the past year reflected huge price increases for iron ore and coal, Australia’s two biggest export earners. That has boosted Australia’s terms of trade, lifting profits, investment, employment and tax receipts.

– Thomson Reuters –

November 19, 2010

Bernanke Fires Back At Criticism About Fed Easy Money Policies

Filed under: Uncategorized — bigcapital @ 1:01 pm
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Bernanke Fires Back At Criticism About Fed Easy Money Policies

WASHINGTON (Dow Jones)–Federal Reserve Chairman Ben Bernanke fired back at criticism from home and abroad that his easy money policies are designed to cheapen the U.S. dollar, arguing China and other emerging economies are causing problems for themselves and the rest of the world by preventing their currencies from strengthening as their economies grow.

By keeping their currencies artificially low, Bernanke argued in remarks prepared for delivery in Frankfurt Friday, China and some other emerging markets are allowing their economies to overheat and are producing what he called “a two-speed…recovery” that isn’t sustainable. Their “strategy of currency undervaluation,” he warned, had “important drawbacks” for them and the world economy.

Bernanke has come under attack for deciding to buy $600 billion in U.S. Treasury bonds in an effort to drive down long-term interest rates. Critics in the U.S say it could cause inflation. Those abroad say the flood of dollars that the Fed is effectively printing to finance the purchases is causing investors to pour money into overseas economies and could cause asset bubbles. Some have accused the Fed of trying to weaken the dollar to spur U.S. exports.

Bernanke countered that argument, saying the Fed’s policies are aimed at strengthening the U.S. economy, which in turn should benefit the U.S. dollar.

The Fed chief underlined that the U.S. dollar’s status as a safe haven during times of financial market turmoil, such as Europe’s debt crisis earlier this year, stems from the underlying strength and stability the U.S. economy has shown over the years. The fact that when global investors get nervous, they prefer the U.S. dollar to any other currency is a good thing which the U.S. wants to maintain, Bernanke signaled.

“Fully aware of the important role that the dollar plays in the international monetary and financial system, the (Fed) believes that the best way to continue to deliver the strong economic fundamentals that underpin the value of the dollar, as well as to support the global recovery, is through policies that lead to a resumption of robust growth in a context of price stability in the United States.”

Bernanke effectively acknowledged the U.S. currency does need to weaken against currencies in emerging markets because their economies are growing so much faster than economies in the developed world.

“The exchange rate adjustment is incomplete, in part, because the authorities in some emerging market economies have intervened in foreign exchange markets to prevent or slow the appreciation of their currencies,” the former Princeton professor said.

Though scholarly in tone, the Fed chairman’s message was unusually blunt in laying blame for inflationary pressures in emerging markets and tensions over currencies on countries like China.

“Why have officials in many emerging markets leaned against appreciation of their currencies toward levels more consistent with market fundamentals?” he asked. Mainly because they believe that will spur exports and boost growth, he said, but that strategy is threatening global growth.

Central banks in many countries intervene in currency markets to manage exchange rates. As dollars flood into their economies from exports, the central banks hold on to the dollars and use them to purchase assets like U.S. Treasury bonds rather than converting them into back into their domestic currencies, which would make those currencies rise in value. Bernanke noted that by selling so much yuan in exchange for dollars to keep the yuan low, China has accumulated a massive $2.6 trillion stock of U.S. dollars assets.

Countries like China that keep their currencies undervalued could face important costs at home, including a reduced ability to use monetary policies to stabilize their economies and the risks associated with excessive or volatile capital inflows. Some economists fear inflation could take off in China’s over-heating economy, or a property bubble may be developing.

Bernanke also tried to respond to domestic critics of the Fed’s recent move, laying out a case that unemployment could keep rising without action by the central bank and that inflation was too low and could fall further.

Though critics say inflation could soar because of the Fed’s actions, Bernanke said he was committed to keeping inflation at around 2%. It is now around 1%, by the Fed’s preferred measures, which strip out food and energy prices.

“On its current economic trajectory the United States runs the risk of seeing millions of workers unemployed or underemployed for years,” Bernanke warned. “As a society, we should find that outcome unacceptable.”

Bernanke got one voice of support from an important internal skeptic Thursday. Narayana Kocherlakota, president of the Federal Reserve Bank of Minneapolis, said in comments in Chicago, that he supported the Fed’s easing program. He had expressed some skepticism about its need and effectiveness in the past, but described the program Thursday as “a move in the right direct” though he added he didn’t think it was a cure-all for the U.S. economy, a point that Bernanke echoed in his Frankfurt comments.

(END) Newswires

November 18, 2010 21:00 ET (02:00 GMT)

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November 12, 2010

Is the Price of Gold Heading for $2,300 an Ounce?

Filed under: Uncategorized — bigcapital @ 8:53 am
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Is the Price of Gold Heading for $2,300 an Ounce?

 

Debate over the Fed’s recent QE2 maneuver has been generating some interesting volatility on commodity prices, particularly Gold. We’ve seen the US dollar gaining strength as investors anticipate the possibility of renewed inflationary growth in the US, but occasionally there is similar counter-pressure from investors working to price in the devaluation which must naturally accompany a money-printing policy such as QE2.

 

Commodity prices appear to be rising despite a strengthening USD, but there have been a few minor blips in downward movement amid growing concerns as to the effect of QE2. Moreover, the sudden weakness of the EUR in recent days, due to debt concerns in Europe’s periphery, has also added to these fluctuations in both the USD and commodity prices.

 

Previous articles have harped on the notion of a rising price of Gold, and nothing really seems to be able to change that analysis. We’ve seen Gold reach a nominal record high of $1,420 an ounce, even though its true record, after adjusting for inflation, was reached about 30 years ago.

 

What is interesting in this observation is the price reached at that time, in today’s dollars. When Gold took off in the 1980s, its value in today’s dollars was around $2,300 an ounce. If today’s price of Gold is heading in a similar direction, then right now may be the best time imaginable to open a Gold Trading Account and start making profits. What are you waiting for?

Fed to buy $105B worth of bonds in first phase

Filed under: Uncategorized — bigcapital @ 8:52 am
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Fed to buy $105B worth of bonds in first phase

The euro was little changed against other major currencies. At present, the euro is worth 1.3771 against US Dollar

WASHINGTON (AP) -Thursday, November 11, 2010- The Federal Reserve will buy a total of $105 billion worth of government bonds starting later this week as it launches a new program to invigorate the economy.

The bonds will be purchased through a series of 18 operations that start on Friday and end on Dec. 9, the Federal Reserve Bank of New York said Wednesday. The purchases are the first since the Fed announced last week that it will buy a total of $600 billion worth of Treasury bonds over the next eight months.

The Fed will buy $75 billion of government debt as part of the new program. And, it will buy another $30 billion, using the proceeds from its vast mortgage portfolio.

That totals $105 billion for the first phase of the Fed’s government bond buying. The Fed last week said it anticipates buying on average $110 billion a month.

The Fed’s announcement on Wednesday helped boost stocks and bond prices.

— The Dow Jones industrial average closed up 10.29 points to 11,357.04.

The euro was last at $1.3771 , little changed from late Wednesday in New York

— Treasurys moved higher after the auction of $16 billion in 30-year bonds and after the Fed laid out its bond-buying schedule.

In late afternoon trading, the 10-year note was up 37.5 cents on the day. The slight gain lowered the yield to 2.65 percent from 2.66 percent late Tuesday as bond prices and yields move in opposite directions. The yield on the 2-year note inched lower, from 0.45 percent to 0.43 percent. The 30-year bond traded at 4.25 percent, compared with 4.24 percent late Tuesday.

Through the bond purchases, the Fed intends to push rates even lower on mortgages, corporate debt and other loans. Mortgage rates have sunk to their lowest levels in decades just in anticipation of the Fed’s action.

The goal: Cheaper borrowing costs will lure Americans to boost spending. Lower corporate bond rates will spur business investment. Higher stock prices will boost households’ wealth, which was clobbered by the recession. Fed Chairman Ben Bernanke said such a chain of events would produce a “virtuous cycle, which will further support economic expansion.” Faster economic growth in turn would prompt companies to boost hiring.

However, some Fed officials and economists don’t think the program will do much to rev up the economy and lower unemployment, which has been stuck at 9.6 percent.

And, there’s fears inside and outside the Fed that the program could lead to new problems: runaway inflation and inflated prices for commodities, bonds or stocks, creating new speculative bubbles. Gold prices have jumped. Some investors see the precious metal as a hedge against inflation.

The Fed’s program also has struck a nerve overseas. China and other countries have complained that the Fed’s bond-buying program could hurt them. Because the Fed’s program could weaken the U.S. dollar further, that makes other countries’ currencies more expensive, cutting into their exports, and fueling inflation.

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