The federal budget deficit reached its widest gap on a 12-month moving total basis in February 2010 at $1.478 trillion. Although remaining at astronomical levels, the budget deficit has been trending lower and stood at $1.246 trillion in March 2012. The year-over-year growth in the 12-month moving total of federal outlays peaked at 19.7% in July 2009. In March 2012, the year-over-year change in the 12-month moving total of federal outlays was minus 1.1%. The median growth in the year-over-year moving total of federal outlays from December 1955 through March 2012 is 6.6%.

The consensus view is that after adjourning from its September 20-21 meeting the FOMC will announce a plan to lengthen the maturity structure of its securities portfolio by increasing the proportion of longer-maturity securities in the portfolio.

Although quantitative easing might not help stimulate domestic spending on goods, services and assets, in the words of our grandmothers-it couldn't hurt. All else the same, if the Fed purchases securities in the open market, the seller of these securities can do one or a combination of three things with them - spend them, lend them or just hold them. If sales proceeds are spent or lent, then there is a net increase in spending on something in the economy. Only if the sales proceeds are just held would quantitative easing not lead to a net increase in spending in the economy.

Historically, % changes in MFI credit "explain" a large proportion changes in nominal GDP. Commercial bank credit accounts for the largest component of private MFI credit. Since the FOMC commenced its second round of easing in early November 2010, the increase in Federal Reserve and commercial bank credit has been dominated by the increases in Federal Reserve credit. If the FOMC terminates its easing policy in June and private MFI credit creation does not pick up, total MFI credit growth will slow. All else the same, this would augur poorly for nominal GDP growth in the second half of 2011.

The debt problems that Greece, Portugal and Spain are currently facing have undoubtedly had a negative effect on global financial markets, and will probably have some negative effect on global economic activity. Problems with these countries, however, will not derail the global economic recovery that is currently underway. The biggest threat to the continuation of the global economic recovery would be some policy mistake by the Chinese economic policymakers resulting in a rapid deflation of the Chinese real estate bubble, which, in turn, would reduce Chinese real GDP growth.

The Congressional Budget Office tell us that we cannot grow our way out of the long-term federal budget deficit. The acceleration in real and nominal economic growth the U.S. economy has experienced in the past two quarters, however, is helping to reduce the deficit in the short-term. When growth picks up, corporate profits and household income do too. Thus, tax revenues pick up, or at least do not contract as much, while expenditures such as unemployment insurance benefits and food stamps slow down, not to mention government capital injections into teetering financial institutions.

Greece's debt crisis may not make much of an impact on U.S. economic growth. In the third and fourth quarters of 2009, total U.S. exports increased at annual rates of 24.6 percent and 28.1 percent, respectively. South America and the Pacific Rim accounted for a combined 31.7 percent of U.S. exports in the fourth quarter of last year, while Europe accounted for just 23.1 percent. Kasriel and Bangalore also comment on the likely prospects for a low federal funds rate in the long term, and record lows for new home sales.

Each American was responsible for an average of $38,651 in gross federal debt in 2009. That figure will grow to $62,808 by 2020, according to Congressional Budget Office projections. Short of changing Social Security and Medicare, all we can do to alleviate the strain on our descendents is increase our current savings rate. Kasriel and Bangalore also examine slipping consumer confidence figures and a rising home price index.

Annualized growth rates over the first three quarters of 2010 will be less than one half of the 5.7 percent growth rate in the fourth quarter of 2009. Consumer inflation showed signs of slowing in January. Other than a costmetic increase in the discount rate, the Fed will probably find no pressing reason to tighten monetary policy this year.