Monetary News Nov. 8-12

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News
FRIDAY
Obama’s economic view is rejected on world stage
Free trade deal with South Korea eludes president.
G-20 refuses to back US push on China's currency
Leaders of 20 major economies on Friday refused to back a U.S. push to make China boost its currency's value, keeping alive a dispute that raises fears of a global trade war amid criticism that cheap Chinese exports are costing American jobs.
Why there's gold fever
There is at present a profound uncertainty about currencies. That is why the president of the World Bank, Robert Zoellick, created such a stir with a brief reference to an enhanced role for gold in the course of a plea for a more sustainable international exchange rate system.
Bernanke's worst nightmare: Ron Paul
Ben Bernanke has had his hands full since his first day on the job as Federal Reserve. Chairman nearly five years ago. It's about to get even tougher.His harshest critic on Capitol Hill, Rep. Ron Paul of Texas, is about to become one of his overseers.
G-20: We'll avoid currency war
Completing a two-day summit in South Korea, the G-20 nations released their so-called Seoul Action Plan, a communiqué that outlines a wide range of macroeconomic policies.
Why Fed bond-buying plan is raising trade tensions
It turns out many foreigners are pretty angry, too. They say the Fed's $600 billion program is a scheme to give U.S. exporters an unfair edge - one that endangers the global economy.
Greenspan vs. Geithner in 'weak dollar' debate
Alan Greenspan, former chairman of the Federal Reserve, and U.S. Treasury Secretary Timothy Geithner locked horns Thursday over whether the Obama administration is supporting a weak dollar to bolster the economy.

WEDNESDAY
Analysis: German tempers fray as U.S. policy gulf widens
Germany's undiplomatic outbursts against U.S. policy, calling it "clueless" before a G20 summit, show growing estrangement on economics as America's focus shifts away from transatlantic ties to domestic challenges and Asia.
Economic Boost Or Bad Policy? GOP Denounces New Fed Plan
Backlash Building Against Central Bank's New $600 Billion Stimulus Program.
Fed Counts on 'Psychological Bump' With Borrowing, but May Just Add to Debt, Inflation
Investors beware: The Federal Reserve may have just agreed to make $600 billion more available for borrowing, but don't expect to see that money flooding the market any time soon.
China tightens bank holding requirement
China, in response to the Federal Reserve's move to inject billions into the U.S. economy, has raised the reserve requirement ratio on major banks in an attempt to control its flow of new money.
Enough already about dollar debasement
OK, maybe the dollar's not quite almighty any more. But neither is it the 98-pound weakling it's widely made out to be.

TUESDAY
China to Tighten Control on Inflows of Overseas Funds
China will force banks to hold more foreign exchange and strengthen auditing of overseas fund raising, stepping up efforts to curb hot-money inflows that may inflate asset bubbles and add pressure for a stronger yuan.
Key banker is skeptical about Fed plan
Richard Fisher, president and CEO of the Federal Reserve Bank of Dallas, whose district includes Houston, said he could envision this second round of Fed purchases leading to a weaker dollar, "super ordinary inflation," financial speculation and accelerating the transfer of wealth to the rich "from the "poor and the worker and the saver."
Global Fed bashing casts shadow over G-20
Growing criticism of U.S. Federal Reserve policy is fueling global tensions as leaders of the world's largest economies prepare to meet in South Korea Wednesday.
Oil near $90. Thanks a lot, Fed.
Crude is currently trading around $87 a barrel. Prices have not topped $90 in more than two years. But now that the Federal Reserve has made its latest round of quantitative easing official, some fear that crude at $90 is likely in the not-so-distant future.
Fed survey: new standards don't lure small firms
Banks loosened lending stnatdards for small businesses over the past three months but demand for loans remained weak.
Fed Global Backlash Grows
China and Russia Join Germany in Scolding; Obama Defends Move as Pro-Growth.

MONDAY
Fed Governor Doubts Program
Close Bernanke Associate Fears the Risks of Bond-Buying, Wants Regular Review.
Obama returns fire after China slams Fed's move
Obama says U.S. low growth or no growth danger to world.
US Geithner says chances of double-dip recession receding
US Treasury Secretary Timothy Geithner said Monday that the US economy was starting to pick up and that chances of a "double-dip" recession were lower than at any time in the last 12 months.
Gold Falls From Near Record as the Dollar Gains; Silver Declines
Gold declined in New York, after nearing a record, as a stronger dollar curbed demand for the precious metal as an alternative asset. Silver fell from a 30- year high.
World Bank chief surprises with gold standard idea
Leading economies should consider adopting a modified global gold standard to guide currency rates, World Bank president Robert Zoellick said on Monday in a surprise proposal before a potentially acrimonious G20 summit.
US confident G20 will back new trade scheme
US Treasury Secretary Timothy Geithner said Monday he was confident China and other countries would support a global trade rebalancing plan at an upcoming G20 summit.
Bernanke's road to hell
Was Ben Bernanke lying then, or is he lying now?
Friedman Casts Shadow as Economists Meet
The central bank will indirectly be financing the government’s deficits on a scale not seen since World War II. It will buy the equivalent of most of the new Treasury debt issued through next June. The portfolio of federal bonds it amassed as a result of the 2008 crisis will swell further, just about doubling.

Economists Comments
FRIDAY
Good Ship QE2 Has Set Sail, Course Set for Japan Circa 1995
Watching precious metals, gold, the dollar, and especially Treasuries after the Fed's quantitative easing announcement.
Those nice chaps at the IMF
THE euro zone’s third-quarter GDP figures, released this morning, seemed only to highlight the theme being played out in bond markets: “core” economies are doing fine but “peripheral” countries are struggling.
The world against Bernanke and his easy money
The assault against Bernake's easy money has reached such fever that President Obama felt it necessary to defend the $600 billion in new-money printing in a news conference in India.

WEDNESDAY
Will QE2 Trigger War Games?
Global tensions are on the rise.
Is the Fed's Debt-Buying Unconstitutional?
Isn’t the problem fiscal incontinence and regulatory misfeasance, and business uncertainty about all of that, which is creating joblessness? Not a lack of liquidity and not deflation, which is not a clear and present danger, as instead inflation is still with us?
QE2's Days Could Be Numbered
Strategists suggest the Fed may be forced to scale back QE2 sooner than anticipated.
Tea Party Rallying Cry: Abolish the Federal Reserve!
is the Federal Reserve out of control? The Tea Party thinks so. Suspicion of our nation’s central bank is a recurring theme of the populist movement, which blames the Fed for soaring debt, high unemployment, and a sinking dollar. It also accuses the Fed of being the handmaiden of the Obama administration, and way too cozy with Wall Street.
No Soft Patch, No Excuse For Another Round Of Quantitative Easing
It is fiscal--not monetary--policy that has held back the economy and kept unemployment high.

TUESDAY
Bernanke Ignores Basic Laws of Economics
Bernanke proclaimed that lower interest rates wrought by QE will increase stock prices on the way to more consumer wealth and confidence. According to our Fed Chairman, this might boost spending, and "Increased spending will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion." One can't make this up.
QE2 Appears Factored Into the US Treasury Yield Curve
The second round of quantitative easing appears to be factored into the yield on the 10-Year note between the annual value level at 2.813 and quarterly and semiannual risky levels at 2.265 and 2.249.
The World Revolts Against Bernanke's QEII
The great Bernanke QE2 debate continues to heat up. In the run-up to the G-20 meetings, China, Russia, Germany, and others are all coming out against the Federal Reserve's quantitative-easing agenda. They don't want hot-money excess dollars to flow into their higher-yielding currencies.
Easing puts off real economic revamping
Quantitative easing (QE) should cease immediately on both sides of the Atlantic. In the short term it might cause a stockmarket crash, or even a double dip recession, but in the long term it could be the necessary step if the economic challenges facing the developed world are to be tackled.
Inflation Targeting Won't Fix the Fed
Successful inflation targeting by Ben Bernanke or his successors will do no more than paper over a debt-driven system that is beyond repair.
Ben Bernanke's Impossible Dream
In other words, Mr. Bernanke and his FOMC allies are risking higher interest rates and inflated commodity costs in the pursuit of the contradictory objectives of higher inflation and lower bond yields, seemingly oblivious to all the evidence that they are pursuing an impossible dream.
Bubble, Crash, Bubble, Crash, Bubble...
Given that interest rates are already quite depressed, Bernanke seems to be grasping at straws in justifying QE2 on the basis further slight reductions in yields.
'The US Has Lived on Borrowed Money for Too Long'
In an interview with SPIEGEL, German Finance Minister Wolfgang Schäuble, 68, criticizes US calls for Germany to reduce exports, outlines his plans for an insolvency framework for indebted European nations and the emphasizes the significance of the German-French axis for Europe.

MONDAY
Sarah Palin knocks Fed move
Our government is pumping money into the banking system by buying up Treasury bonds,” Palin will say in the speech. “And where, you may ask, are we getting the money to pay for all this? We’re printing it out of thin air.”
Reviving '70s stagflation
As President Obama restores the Jimmy Carter-era solar panels to the executive mansion, Federal Reserve Chairman Ben S. Bernanke is bringing back Mr. Carter's monetary policy, running the printing presses faster than they've run since lava lamps and disco were in style.
QE2 Hurts Main Street at Gas Pump; More Banks Close on Bank Failure Friday
Crude oil traded above its May 3 high with the price at the gasoline pump up about a dime since Wednesday's QE2 announcement.
QE2 Questioned From Within and Without
Get ready for a showdown at the "Is It OK?" Corral.
QE2, Midterm Elections Produce Better Than Expected Economic Reports
QE2 will likely be effective at lowering real interest rates, and the Republican victory will continue pushing Obama more toward "center."
America will survive the errors of Ben Bernanke's trigger-happy Federal Reserve
America is a resilient nation, with far healthier demographics than China, Japan, Korea, Germany, Italy or Russia. The storm will blow over.

Blogs
FRIDAY
Fed Insiders Doubt QE2
The pitfalls of central bank communication.
Will QE2 Actually Cause Interest Rates, Dollar to Rise?
We're told QE2 will create a wealth effect that will drive demand for borrowing and expansion. However, interest rates are currently rising.
QE2 Will Either Fix the Economy or Destroy It
There is no middle ground on this one and a lot of doubt surrounding the decision.
Bernanke's Experiment: Monetary Curiosities and Actualities
Basically, the Fed is firing up the digital printing presses to stimulate the economy by making it cheaper to borrow money. There has been a lot of debate over whether this will work. But perhaps a deep question is whether this is an appropriate role for monetary policy.
QEII follow-up: why do people hate the idea?
I believe the price of gold is high because of "financial-existential risk," not because of inflation per se.  The U.S. dollar and debt are no longer unambiguously safe and is there any real solution to the triple menace of highly leveraged banks, moral hazard, and financial strategies of extreme negative skewness?  It remains to be seen.
Hot Money, Gold, Foreign Exchange And The Fallout From QE
What do “hot money,” gold, sovereign debt, foreign trade, and Germany and China all have in common? Everything. They are all lined up against the U.S. and our new quantitative easing (QE2). There is fallout related to quantitative easing, and the markets are reacting, from the Fed’s perspective, badly.
Geniuses At Work
Inflation is the result of too much money chasing too few goods.  So by increasing the flow of goods (and services) produced in an economy, rapid growth decreases the risk of domestic inflation. That the finance ministers of three major world governments do not understand this fundamental fact is appalling.
Fed and Trade, Fed Critics, Fiscal Adjustment
A roundup of economic news from around the Web.
Speaking of the Fed...
I think this history is well worth reviewing. Just as most people casually assume that Roosevelt did a heckuva job during the Great Depression, most people casually assume that the Fed has done a heckuva job with its responsibilities.


WEDNESDAY
China's Sure Bet
As the dollar wobbles, China is pulling back from U.S. Treasury securities and buying up hard assets around the world.
What Quantitative Easing Means for the World
Capital controls and a fixed exchange rate distort local capital markets in ways that can lead to malinvestment or underinvestment; done badly they harm global trade flows; and they are often a source of rent-seeking for local elites. For this last reason, they are also pretty popular.
Don't flip out over QEII (repeating myself)
I'm not sure it will work, because it won't fix the housing market, may not restore the demands for wealth-elastic goods in a sustainable manner, may not restore the normal flow of credit to small businesses, may not lower subjective estimated risk premia, and may not fix the general disconnect between expectations and reality.
Notes on Bernanke’s Apologia for QE2
A strong argument can be made that, instead, the Fed’s actions created immense uncertainty and confusion about which commercial banks, investment banks, and other big firms would be bailed out and, if they were to be bailed out, how they would be bailed out.
Nobel Winner Gets Another Shot at Fed
Will a Nobel Prize put Peter Diamond over the finish line?  The Massachusetts Institute of Technology economist, rebuffed by Senate Republicans in September for a slot as a Federal Reserve governor, will get another shot soon.

TUESDAY
What Could Go Wrong With QE2
If it works, it is a much prettier picture for the economy. But if it doesn't work, there are some severe unintended consequences we may have to deal with—not the least of which is out of control inflation. Here are a few reasons QE2 might not work:
Fed’s Warsh Skeptical Bond Purchases Can Boost Economy
A top Federal Reserve official raised doubts about the central bank’s ability to boost the U.S. economy by buying more government debt, just days after the Fed took the step.
Just how absurd is central planning?
A warning to activist central planners: first step, quantitative easing, second step, communism.
Should Economists Just Stick to Core Inflation?
Making a point about why most economists look at core measures when gauging inflation, Paul Krugman runs a chart on his blog of the year-over-year change in the consumer price index with and without food and energy.
Gold Looking Bubblicious
It's not that quantitative easing may not cause inflation--it might.  In fact, that's sort of the point; the Fed wants a little more inflation in the money supply, in order to ease the unemployment rate.  But consider how much inflation there would have to be for this gold price to make sense.

MONDAY
Monetary Policy Is Looming Issue in 2012 Presidential Campaign
By implementing any level of austerity, Republicans can take advantage of the public's outrage at debt, deficits, and the Fed.
Digging oneself into a hole?
There are few universal truths in economics. One is if you put some of the best economists in a room together, you’re guaranteed to get wildly different opinions.
A QE2 Ditty
It's Called Quantitative Easing.

Reports
WEDNESDAY
The Hayek Rule
It is necessary for the economy to cleanse itself of bad investments after a bubble bursts and readjust itself through a reallocation of misplaced resources. As a result, some of the Fed’s policy responses to the crisis have prolonged this painful process, dragging out the economic woes of the country.