Money Supply Up, Reports Bank Of Japan

Includes: FXE, FXY, UDN, UUP
by: Ralph Shell

Sometimes, we expect too much from the political class. Last night's Washington address failed to provide any new programs, but rather continued to blame Obama's opposition for today's problems. Further, future problems, when they occur, will be because Congress did not approve of the administration's plans. But the plans are basically a wish list of things to be accomplished: raise the minimum wage, take action to reduce climate change, help the middle class to make up lost income in the last four years, and so forth. Specific plans, however, outlining how this is to be accomplished are lacking.

"About Spending Your Way to Prosperity" was the title given to the speech by the conservative Charles Krauthammer. The administration, apparently all from the Krugman wing of Keynesian economic thought, continues to believe all U.S. problem-solving is the role and job of Washington. In fact, the Democrat Whip in the House, Steny Hoyer, when asked if the country had a spending problem said, "The Country Has A Paying For Problem."

Anticipating positive changes from the existing policy makers is difficult to foresee. The administration wants more government, and the House is controlled by those who think big government is the problem. As a free market libertarian, I disagree with the administration's policies. But as an American expatriate currently living in an EU country, the U.S. does not have a monopoly on the big intrusive government concept.

It is real easy to get bearish on the USD long term when the same policies are to continue. The Federal government's massive spending plans provide a stimulant for the economy, but the deficits add to the ballooning debt. Following the lead from Japan, the Fed then expands the money supply to float the U.S. Treasury debt. Currently, this expansion is going on at the rate of $85B per month, and Janet Yellen, a voting member on the open market committee, says perhaps the money growth should continue even after the 6.5% unemployment benchmark has been reached.

So the Washington pols failed to give us some short-term trading ideas, and in Moscow, the G7 continues to provide mixed signals. It seemed like the G7 had given support to Japan's pending monetary efforts to stimulate their economy, even though this weakens the yen, but alas, there were dissenting opinions.

In Europe, the Bundesbank says 1.35 is not too high for the euro, but then there are voices who say the exports of Europe are hurt by a 1.35 euro. It is not easy to know whose ox is being gored, and who can howl the loudest.

With the finance ministers and all G20 members about to assemble in Moscow, further comments on the "currency wars" and the yen's value can be expected. In the meantime, the Bank of Japan announced today that cash circulating in Japan was up 3.1% to ¥80T, the biggest increase in over six years. Does this mean the yen printing presses are just warming up?

Who knows what the pols will say in Moscow as they try to defend their interests. We will be listening to their comments, hoping they will talk the market down, where we will try the long side of the USDJPY (NYSEARCA:FXY).

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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