A week later and everyone is a bit more
nervous, with the speculation that US sovereign debt purchases by the
Federal Reserve will wind down and with the Bank of Japan completely
cornered.
In anticipation to the debate on the Fed’s bond purchase tapering, on April 28th (see here)
I wrote why the Federal Reserve cannot exit Quantitative Easing: Any
tightening must be preceded by a change in policy that addresses fiscal
deficits. It has absolutely nothing to do with unemployment or activity
levels. Furthermore, it will require international coordination. This is
also not possible. The Bank of Japan is helplessly facing the collapse
of the country’s sovereign debt, the European Monetary Union is anything
but what its name indicates, with one of its members under capital
controls, and China is improvising as its credit bubble bursts.
