Monetary News Dec. 13 - 17

---

News
FRIDAY
IMF chief worried about Europe domino effect
The head of the International Monetary Fund said on Thursday he was worried that EU leaders' piecemeal approach to Europe's debt crisis was encouraging markets to pick off weak countries one by one.
Fed Proposes Lower Store Fees on Debit Purchases
The Federal Reserve proposed on Thursday lowering the fees that merchants must pay when shoppers use debit cards, a move that could reduce retail prices but result in higher banking fees for consumers.
Fed Proposal on Debit Card 'Swipe Fees' Could Cost Banks Billions
Taking a whack at one of the banking industry's biggest cash cows, the Federal Reserve Board proposed today to slash the "swipe fees" that debit card companies charge retailers for every transaction they process, a move that could cost Mastercard, Visa, and banks billions of dollars.
Vending machine spits out gold bars and coins
"If you're a shopper looking for something sparkly to put under the Christmas tree, you could skip the jewelry and just go for the gold. Thomas Geissler, CEO of Ex Oriente Lux and inventor of the Gold To Go machines, expects the majority of buyers will be walk-ups taken by the novelty. But he says the machines are also convenient for more serious investors looking to bypass the hassle of buying gold at pawn shops and over the Internet.

THURSDAY
European Central Bank will raise capital to fight debt crisis
The European Central Bank said Thursday that it will almost double its capital base to euro10.76 billion ($14.3 billion) — money that will buttress its efforts to contain the continent's government debt crisis.
Dollar gains as euro falls, pushing stocks lower
The euro fell 1% against the dollar after Moody's said that it may lower Spain's credit rating. The stronger dollar hurts U.S. companies that do a lot of business overseas. The Standard & Poor's 500 index, the broadest measure of large U.S. companies, fell 0.3%.

WEDNESDAY
Prices edge up, inflation still at bay
The Consumer Price Index, a key measure of inflation, increased 1.1% over the past 12 months ending in November, the Bureau of Labor Statistics said. And the more closely watched core CPI, which strips out volatile food and energy prices, rose just 0.8% over the year.
Read the Fed statement
This is the statement of the minutes of the Federal Open Market Committee meeting released Dec. 14, 2010.
Fed Sticks to Bond-Buying Policy
Central Bank Keeps Rates Low, Says Economy Recovering but Not Fast Enough to Cut Jobless Rate.
New Fed lineup next year could mean more dissents
Federal Reserve Chairman Ben Bernanke will likely face more pressure from some his own colleagues next year to scale back the Fed's $600 billion bond-buying program to rev up the economy.

TUESDAY
Bernanke Options May Be Limited Amid Republican Scrutiny
Federal Reserve Chairman Ben S. Bernanke may find his options for reducing unemployment near a 26-year high are constrained after Republicans take control of the House of Representatives next month.
The Dollar Gains
The dollar gained against the euro and yen before the outcome of the Federal Reserve’s meeting to review its policy of debt purchases to bolster the U.S. economy.

MONDAY
Fed remains in the hot seat
The Federal Reserve has been in the hot seat since its last meeting. Economists and other Fed watchers expect the central bank's statement to be somewhat more upbeat than a month ago, acknowledging some signs of improvement in the economy.
Chinese inflation spikes on food costs
Higher food prices continue to be the main driver of inflation in China, raising the likelihood of an imminent interest rate hike as the country tries to reel in its red-hot economy.

Economists Comments
FRIDAY
Rising Interest Rates Signal a Bullish Recovery
There has been much hand-wringing in the business press lately about the recent rise in interest rates. The fear is often expressed that this will choke off the economic recovery and decimate further the still-weak housing industry. But in fact, rising interest rates are an extremely bullish sign; tangible evidence that the economy may have finally turned the corner and is poised for a sharp rise in growth.

THURSDAY
Bernanke's bold QE2 finally explained
Federal Reserve Chairman Ben Bernanke is using further quantitative easing to lift the US economy. But there's a big difference between creating more money and creating more value.
The Unintended Consequences of Monetary Policy
QE2 is not helping consumers or the housing market, but it is helping banks with a steeper yield curve. Was that the plan all along?
The Future of Our Asymmetric Recovery
The inflation versus deflation debates are interconnected with the nature of the economy's recovery because the key to the former debate is held in the answers to the discussion of the latter.

WEDNESDAY
Three ways to stabilize the euro
The European debt crisis has weakened the euro considerably, but there are opportunities to help put it back on even ground before it's too late.
China's 'death grip' on the dollar
Will China's addiction to dollars lead the global economy into a bruising showdown with inflation?
How Fed's policymakers hold power over your purse
The Federal Reserve's chief policymaking group has vast power over the finances of ordinary people, businesses and investors. The consequences of its interest rate decisions range wide: from people's ability to get affordable lonas to the price of cereal at the grocery store or gasoline at the corner station.
FOMC Discusses QE2 Progress, Unemployment
The future of quantitative easing and whether or not it should have the dual mandate of price stability and full employment are primary topics in this last meeting of 2010.
QE2 Is a Failure: Higher Yields Will Hurt Overbought Stocks
The Fed shouldn't have taken the federal funds rate below 3%, because 0%-1% rates for Wall Street simply ignite commodity speculation and create bubbles.
Five Ways Inflation in China Can Affect the US
The era of goldilocks in China is over; the era of trade-offs and tough choices for the Chinese has begun.

TUESDAY
Federal Reserve Lending Programs
The Federal Reserve recently released detailed data on its financial rescue activities as required under the new Dodd-Frank Act. The information covers nine special lending and related facilities and the programs related to the acquisition of Bear Stearns and assistance given to AIG during the financial crisis. The data covers more than 21 thousand transactions and trillions in loans and assets purchases. However, comparable information was not provided on its discount window lending.
Stress Testing the Fed
The Federal Reserve has recently announced its intention to purchase an additional $600 billion of securities as part of a second round of quantitative easing. Security sales and other methods of generating increased interest rates entail significant interest rate risk for the Federal Reserve and could result in either economic or book value insolvency long before interest rates rise and return to normal.

MONDAY
Can the euro survive its 'hair shirt'?
It's not looking good, says longtime euroskeptic Desmond Lachman.
Why Inflation in China Could Get Out of Control
Price controls, subsidies will serve as temporary palliatives at best; the only way to control inflation in China is through methods that substantially slow the economic growth rate.
Fed Has Only Temporarily Beat Deflation
John Williams calls for the "Hyperinflationary Great Depression," but it's easy to see that the US will hop in and out of deflation for the foreseeable future.

Blogs
FRIDAY
Keep calm and carry on?
Having learned that inflation ticked up to 3.3% in November, making yet another month in which price increases ran ahead of target, Britons may be wondering when the Bank of England will begin hitting its monetary brakes.
National Currency With State Implications
The Obama administration hopes to double exports within five years, and a weaker U.S. dollar would help lift foreign demand.
Happy on the sidelines
In October David Cameron, the British prime minister, collected the support of 12 other countries to limit next year’s European Union budget to a rise of 2.9%. After an ill-tempered fight with the European Parliament, Britain (and the other net-contributors) got its way.
Regional Fed Surveys Flag Seeds of Future Inflation
Economists looking at the November consumer price index released Wednesday couldn’t reach agreement on whether inflation is about to rise or ebb even further toward deflationary levels.

THURSDAY
Nominal GDP Targeting
For the Fed, a target represents a justification for taking action. Some people may be upset with what your action does to the exchange rate or the interest rate. Having a target allows you to justify your action.

WEDNESDAY
Parsing the Fed: How the Statement Changed
The Fed’s statement following the December meeting was little changed from the previous month when the central bank announced a new round of bond buying.
The Lone Dissenter: Kansas City’s Hoenig Goes Out With A Record
It’s eight for eight — a perfect dissent streak — for Thomas Hoenig. The Federal Reserve Bank of Kansas City President concluded his final meeting as a voting member of the Federal Open Market Committee as expected, dissenting against his colleagues’ stance on monetary policy

MONDAY
Is Ron Paul Good for Monetary Policy?
Paul will ultimately be good for monetary policy because he will actually bring some oversight to the Fed, which has been sorely lacking.
Fed independence is the worst solution except for all the others
How to best achieve the Fed mandate remains up for debate.

Reports
None