Japan's Disaster and US Finances

The catastrophic events in Japan so overwhelming in their visual impact, will also have an influence on the economy of the United States.  The still to be determined cost of rebuilding the devastated area and its infrastructure may well exceed $250+ billion.  While some buildings were insured, much of cost of reconstruction will fall on the Japanese government and the taxpayers.  It is expected that Japan, as the second largest holder of US Treasuries, will cease their purchase of these instruments and will begin instead to sell a portion to help fund a massive rebuilding effort.Further Japan will, in all likelihood, have to issue new bonds in order to accumulate the funds needed. They then will be in competition with the United States for international bondholders.What does this mean for the US?  In order to sell its bonds interest rates will have to be increased to appeal to the marketplace.  Additionally, the Federal Reserve, which is about to end its...(Read Full Post)