Monetary News Nov. 15-19

---

News
FRIDAY
Bernanke: Fed's right on stimulus, China
Federal Reserve Chairman Ben Bernanke on Friday defended the central bank's plans to spur U.S. economic growth, saying they could help reduce unemployment, and -- in a message aimed at China -- urged developing nations to let their currencies gain in value.
WRAPUP 2-China raises RRR again as inflation fight intensifies
China ordered lenders on Friday to lock up more of their money with the central bank for the second time in two weeks, stepping up its battle to pull excess cash out of the economy before inflation has a chance to take off.
WTO chief warns against currency wars
Pascal Lamy, WTO director general, said the fight over currency values -- in a reference to the United States and China -- could upset global financial stability.
What's Really Behind Bernanke's Easing?
My guess is that the Fed chairman knows that we still have too many banks overstuffed with toxic real estate loans and derivatives.
European Bank Revolt Over Regulation Grows
European bankers are growing increasingly vocal in their opposition to what they view as regulatory overkill in response to the fiscal crisis. Banks in Europe say too much red tape will prevent them from providing much-needed financing to companies, thereby killing off a nascent economic recovery.

THURSDAY
Bernanke Defends Fed Policy as Republicans Step Up Criticism
Federal Reserve Chairman Ben S. Bernanke defended his expansion of record monetary stimulus in a meeting with Senators as top Republican lawmakers stepped up their criticism of the central bank chief’s policies.
QE2: 3 signs to watch for progress
Many economists and market commentators are convinced that the Fed's move to pump $600 billion into the economy by buying up long-term bonds will do more harm than good for America's economic recovery.
China imposes price controls to stave off inflation
China moved Wednesday to put price controls in place to deal with rising inflation pressures. The government announced price control guidelines and said it would put state reserves of grains, edible oils and sugar on the market when necessary in order to guarantee supplies.

WEDNESDAY
Fed's Lockhart: Fed Will Likely Complete Entire QE2 Program
The Federal Reserve will likely need to complete its $600 billion bond-buying program, Atlanta Federal Reserve Bank President Dennis Lockhart said Tuesday. "The working assumption should be we will in all probability complete the program in the eight months it was designed for," the central banker said.
Stung by Criticism, Fed Officials Reply
Federal Reserve officials, taken aback by sharp criticism of their decision to print money and buy $600 billion in Treasury bonds, are counterpunching to defend themselves and, in some cases, to reinforce their commitment to the policy.
U.S. Inflation Remains Muted
U.S. consumer prices continued to rise modestly in October as gasoline prices surged, but underlying inflation hit its lowest level in more than 50 years, supporting the Federal Reserve's recent move to try to boost the economy.
Bond Market Defies Fed
Interest Rates Rise Despite Launch of Treasury Buying as Investors Take Profits.
China manipulates currency, U.S. panel says
China continues to manipulate its currency and the nation's "exclusionary" trade policies have contributed to a massive deficit with the United States, a special commission said Wednesday.
Senate panel OKs Diamond as Fed member
A Senate panel on Tuesday approved the nomination of Nobel pricze winner Peter Diamon to be a member of the Federal Reserve, marking the second attempt to push through Republican roadblocks.

TUESDAY
Ben Bernanke, politician?
The Federal Reserve was already making a high-stakes economic bet with QE2. Now it's also a political bet, and that doesn't bode well for Bernanke or the Fed.
Bond Market Defies Fed
Interest Rates Rise Despite Launch of Treasury Buying as Investors Take Profits.

MONDAY
Fresh Attack on Fed Move
GOP Economists, Lawmakers Call for Abandoning $600 Billion Bond Purchase.
The Fed vs. Brazil's Reformers
Brazil's President-elect Dilma Rousseff may be pressured to respond to U.S. monetary easing with more protectionism and higher taxes.

Economists Comments
FRIDAY
Lowest Inflation Since 1957 – Are You Kidding Me?
The Fed thinks prices are too low. The Fed wants more inflation — maybe $12-$13 for a chicken dinner at KFC. Fifty bucks for a family of four.
The Euro Debt Crisis Rolls On: "There Is No Way This Thing Ends Well"
The EU was supposed to be about stability. Countries weren't supposed to have deficits more than 3 percent of GDP. Greece's budget deficit is 15 percent in 2009. So the budget isn't healthy, and they're having to tighten more. That'll lead to political instability. There's no way this thing ends well.
Shughart: Fed takes wrong course
Quantitative easing leads away from the path to economic recovery.
Brazil Watch: Will Brazil Raise Interest Rates?
Despite the pressures of an inflating economy, finance minister Mantega believes he can reduce rates.
Bernanke: stop calling it QE!
There's something about quantitative easing that bothers just about everyone - including, believe it or not, Fed chief Ben Bernanke.

THURSDAY
The trap of the Federal Reserve's dual mandate
Fed Chairman Ben Bernanke has wistfully imagined a day when economists might get "themselves thought of as humble, competent people on a level with dentists." But that day will not dawn as long as the dual mandate makes it almost mandatory for him to vow that the Fed "can assist keeping employment close to its maximum level through adroit policies."
Failed Models and the Real Costs of QE2
It has been three years since the crisis began, and Washington, from White House to Congress, has done everything possible to prevent recognition of losses from troubled assets being held at inflated values on bank balance sheets. The Fed, whose independence is necessary to its authority, has increasingly become a policy tool in bidding for many of these bad assets.
The Coming End of the Global Monetary System as We Know It
The White House and Congress must function better together to help save the economy.

WEDNESDAY
Bernanke's Easter Island moment
Even a mere 10 days after its passage, and before significant implementation, it's clear that Bernanke's move, in terms of adverse effect compared to the size of the policy move, is well up there. The Fed's buying program will be concentrated on medium-term Treasury bonds, for two reasons.
Ron Paul's Golden Opportunity
Who better to host the debate over sound money in Congress than the Fed's most persistent critic?
Facts Prove Federal Reserve Has Accomplished Its Mission
The Fed has managed to boost inflation expectations and asset prices, and ensure that economic growth will be spurred higher.
US Economy Heading for Stagflation
A combination of stagnation and inflation is considered to be the worst of all of the potential outcomes for an economy.

TUESDAY
What Caused the Financial Crisis
Was the great financial crisis caused by greedy and reckless bankers and Wall Street players or by a broad range of individuals, financial institutions and governments who became less risk-averse and prudent or by government housing policies that brought on the housing bubble and mismanaged the risks?
Is the Mexican Peso Too Strong?
Mexico is forming its own immigration policy, only dollars moving south -- and not people moving north -- are the objects of concern.
A Double Hex
Inflation in China and a slowdown in Germany may be twin omens of hard times. Plus, a chilly G-20 greeting for President Obama.

MONDAY
New Congress should rein in the Fed
The first order of business for the new Congress is two-fold: move on deficit and debt reduction and rein in the Federal Reserve.
Obamanomics Leaving World Nervous
The president's failed stimulus didn't keep the unemployment rate below 8 percent, as the White House promised: It's stuck above 9 percent, and far higher if we include those too discouraged to seek work. But the stimulus added several more big straws of debt to the camel's back.
Gold Mocks World Spooked By Fed's $600 Billion: William Pesek
There’s plenty of blame to go around for this, and the U.S., Europe and Japan must own their share of it before expecting big gestures from poorer nations. Countries like China are wondering why they are being asked for greater reforms than counterparts such as the U.S., and rightfully so.
What Amount of QE2 Separates a Healthy Economy From Hyperinflation?
Somewhere between $10 and $10 trillion of quantitative easing, the Fed becomes a board of ill repute.
Why the Fed Cannot Regulate ‘Systemic Risk’
A systemic risk advisor might help ameliorate bubbles and busts, though not avoid financial cycles.

Blogs
FRIDAY
Going Broke by Fractions of a Percent
Ben Bernanke should stop paying interest on reserves.
Fed's Priority Must Be Fixing Securitization Process
It's critical to economic recovery and yet the Dodd Frank Act has put it on the back burner.
Fed’s Plosser: QE2 Benefits May Not Outweigh Costs
The benefits of the Federal Reserve’s plan to buy $600 billion in government bonds in an effort to lift the economy may not be enough to outweigh the costs.

THURSDAY
Taylor, Krugman and Quantitative Easing
The main problem with this explanation is that there is actually no evidence for a global saving glut. On the contrary, … there seems to be a saving shortage. … the global saving rate – world saving as a fraction of world GDP – was very low in the 2002-2004 period especially when compared with the 1970s and 1980s.”
QE2
 By lowering long-term real interest rates below where they otherwise would be, QE2 should help expand aggregate demand.  I include the modifier "modestly" because I don't expect these actions to have a very large effect.
Inflated Reputation
George Will doubts the Fed’s ability to carry out its “dual mandate”, This mandate, as described in 2007 by Federal Reserve governor Frederic Mishkin, is for the Fed “to promote the two coequal objectives of maximum employment and price stability.”
What is the case for the Fed?
I view 1929-1932 as a better illustration of the workings of "a world without a Fed" than "a world with a Fed," even though of course we had a Fed then.  If you take the relevant division to be "before and after WWII," the Fed looks pretty good.
Where Quantitative Easing Meets Sustainability (or Bennie and Clyde)
The federal government can perpetually spend more than it takes in from tax and other “revenues.” It can perpetually issue bonds to cover the difference and in case you are worried that no one in their right mind would ever buy them after a long period of this, the Fed can simply buy them up.

WEDNESDAY
The Uncertainty Certainty
Whether the Fed is right or wrong, the fact remains the future of inflation and interest rates, and the Fed’s impact, are extremely uncertain, making it especially difficult for businesses to make decisions.
Corker Calls for Dropping Fed Mandate on Jobs
Sen. Bob Corker (R., Tenn.) called Tuesday for a narrowing of the Federal Reserve’s focus to price stability, the latest attempt by a Republican to alter the central bank’s mandate.
Open Letter To The Fed
This letter to the Fed Chairman Ben Bernanke, signed by prominent conservative economists and writers, asks the Fed to discontinue quantitative easing (QE2). The significance of the letter are the signers.
Has the Fed Been a Failure?
2013 will mark the 100th anniversary of the Fed.  What have we got for our money? Surprisingly little.  Inflation is clearly higher in the post-Fed era as is price variability.
Quantitative Easing, Here and There
I've been surprised to find that there's a considerable amount of outrage among the people I talk to about our quantitative easing program.  I knew China was upset, but I had not appreciated how much this would filter down to ordinary people who do not, say, work for the trade ministry or the central bank.

TUESDAY
Fall of the Mighty Dollar: Looking Back at the Credit Crunch
At the very start of the financial crisis, it was already clear to many that the dollar's hegemony would be questioned.
Yes, gold is at a record high...against the dollar. Just what does that mean?
On Tuesday, a NYT column pointed out that gold is only at a record high if you don't adjust for inflation. Just what are gold – and the dollar – worth?
Fed's QE2 draws the ire of Virginia Tea Party Patriots
The Virginia Tea Party Patriots have sent a letter to the members of the state’s congressional delegation that castigates the Federal Reserve’s second round of quantitative easing (QE) and calls for Congress to audit the Fed.
What will printing money and creating debt lead to?
Ben Bernanke believes that making people feel richer is the key to generating actual wealth. Is he right? We're about to find out.

MONDAY
Conservatives vs. the Fed
The monetary stimulus will do no more good--and could do more harm--than the fiscal stimulus.
The Saga of QE and The Ben Bernank
Since it is difficult to know what prices really are, I believe the trend is more important than the actual level for purposes of assessing the impact of money supply.
Diamond Not Qualified for Fed Board
Tuesday the Senate Banking Committee meets for the second time to consider the nomination of Peter Diamond to a seat on the Federal Reserve’s Board of Governors. Since Professor Diamond was first nominated, he has been awarded the Nobel prize in economics.
Of inhuman bond spreads
Sovereign bond spreads for Portugal, Ireland and Greece point towards trouble.
What if we reform the whole monetary system?
We could try to solve problems within the current monetary framework, or could discuss alternative monetary regimes.
Reform the Monetary System?
Most economists agree that the latest crisis was caused by risk-taking incentives along with financial innovations that allowed banks to lend excessively. While monetary policy prevented, a collapse of the financial system, an increasing number of economists also agree that it is not possible to safeguard the financial system over and over again. There are limits to intervention. Therefore we have to find a way to deal with the very causes of the crisis.
Taleb Shreds Bernanke
Nassim Taleb is out promoting his new book, The Bed of Procrustes, a collection of aphorisms about economics. He is as close to Austrian theory as you can get and he spouts the party line on boom-bust and the role of government in the economy, as well as Austrian theory epistemology.
Open Letter to Ben Bernanke
We believe the Federal Reserve’s large-scale asset purchase plan should be reconsidered and discontinued.  We do not believe such a plan is necessary or advisable under current circumstances.  The planned asset purchases risk currency debasement and inflation, and we do not think they will achieve the Fed’s objective of promoting employment.

Reports
None