"Of course, there is a very simple and elegant solution to declining defense spending, one which has been used time and again in US history when the US government needed to provide the Fed with more securities (i.e. deficit) to monetize: war." "And since the taper is largely priced in, Bernanke is already contemplating how to reengage in the subsequent untapering should all hell break loose following a September tapering announcement prompting the Fed to reengage once more. However, for that to happen, US deficits would need to flow once more, as only then will there be the much needed copious primary issuance of debt that the Fed will need in order to resume monetizing at a fervent pace without impairing the liquidity characteristics of the bond market. "
Posted on: Thu, 18 Jul 2013 18:08:06 +0000
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