Monetary News Jan. 10 - 14

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News
FRIDAY
Bite the bullet
In the first of three articles on the euro zone’s sovereign-debt woes, we present our estimate of the burdens on the currency club’s four most troubled members.
U.S. prices rise as global inflation heats up
American consumers saw prices rise on everything from rent to food to gas last month, as inflation pressures around the world creep higher. The U.S. Consumer Price Index, a key measure of inflation, increased 1.5% over the past 12 months ending in December, up from 1.1% in November.
China hikes reserve requirements again
The People's Bank of China continued to put the brakes on economic growth in an attempt to tame high inflation.
Unquantifiable Easing
Is the Federal Reserve's policy working? No hard evidence either way.
Time for Plan B
The euro area’s bail-out strategy is not working. It is time for insolvent countries to restructure their debts.

THURSDAY
E.U. seeks to expand bailout fund to calm markets
European Union leaders pushed Wednesday to expand the scope of the euro-zone bailout fund, saying more support is necessary as investors worry about the financial prospects of Portugal and Spain.
Economy ended 2010 on a strong note
Optimistic outlook sees bright spots in production, consumer spending, employment.
EU's Broader Debt Plan May Fail to Win Investors After $1 Trillion Bailout
After committing almost $1 trillion, bailing out Greece and Ireland and asserting their determination to save the euro over the past 11 months, policy makers are returning to the drawing board after those previous efforts failed to pacify investors.

WEDNESDAY
The yuan problem isn't going away
Obama may rightfully point out that U.S. manufacturers will be at an unfair competitive disadvantage to China as long as the yuan is not trading more freely. A lower yuan makes goods exported by China cheaper.
Attack of the inflation hawks
This year, three of the four voting positions go to so-called inflation hawks who have been outspoken with their criticism of the Fed's latest stimulus plan. The big concern is that the Fed is essentially "printing money" with the bond purchases, which could devalue the dollar.
China takes steps to flex its currency muscles
State-owned Bank of China Ltd has offered yuan trading to its U.S. customers, a sign that Beijing this year may increasingly promote the use of the Chinese currency in major financial centers.
Merkel Says Germany Ready to Do `Whatever Needed' to Save Euro
Chancellor Angela Merkel indicated that Germany is ready to revise the terms of a 750 billion-euro ($973 billion) rescue fund for indebted states, saying Europe’s biggest economy will do whatever is necessary to protect the euro.
Geithner Says China Must Lift `Substantially Undervalued' Yuan
U.S. Treasury Secretary Timothy F. Geithner said China needs to strengthen the “substantially undervalued” yuan because it puts other countries at a competitive disadvantage.

TUESDAY
Could U.S. Central Bank Go Broke?
The U.S. Federal Reserve's journey to the outer limits of monetary policy is raising concerns about how hard it will be to withdraw trillions of dollars in stimulus from the banking system when the time is right.
Fed official: $600B bond program could backfire
 A member of the Federal Reserve's policymaking committee suggested Tuesday that the Fed may need to scale back its $600 billion Treasury bond-buying program if the economy grows more quickly than expected.
Fed profit hits $81 billion
The money-printing business has never been better.

Economist Comments
FRIDAY
Has The Fed Lit Inflation Fuse?
Our government is spending too much, racking up deficits of over $1 trillion a year. The Fed is encouraging this by printing more money. Eventually this will end — and not necessarily in a gentle way.

THURSDAY
There Is No Getting Around Gold
Money has lacked a golden anchor for 40 years. It has proved a stupendous failure.

WEDNESDAY
The New Financial World Order Evolves Further
Japan supports the euro while China loosens controls on the renminbi. Another step away from the dollar.

TUESDAY
How Congress makes the Fed look sane
Calm down, there's no rush to make reservations for QE3.
Don't Forget the Fed Banks Are Still Banks
The Fed banks collectively own about $1 trillion in mortgage assets, all funded short.
"Illusory Prosperity" - Ludwig von Mises on Monetary Policy
Among the most zealous articles of economic faith here is the idea that additional "liquidity" provided by the Federal Reserve has to ultimately either "find its way" into the asset markets or produce an increase in economic activity, as if the economy and financial markets are simply a set of vessels to be filled.

MONDAY
Bernanke: US Economic Recovery 5 Years Away
While Bernanke says there is evidence that a "self sustaining recovery in consumer and business spending may be taking hold," he believes it may take "four to five more years for the job market to normalize fully."

Blogs
FRIDAY
Federal Reserve turns profit for taxpayers
Federal Reserve will give Treasury $78 billion of its fiscal 2010 profits, up from $47 billion the year before.
New Fed may see more dissent — at least privately
Are hawks with votes more likely to get their way? This year’s voting members of the U.S. Federal Open Market Committee include a trio forming a stronger hawkish group than last year’s lonely Thomas Hoenig. Rocking the boat on the current round of quantitative easing is unlikely. But their differences with Ben Bernanke, the Federal Reserve chairman, may emerge on interest rates.
Spreading infection
THE fear that Greece's sovereign-debt crisis might presage similar episodes elsewhere in the euro zone has been borne out. In November, Ireland joined Greece in intensive care, becoming the first euro-zone country to apply for funds from the rescue scheme agreed in May 2010 in concert with the IMF.
Inflation is Here
Global output of key crops such as corn, soybeans and wheat is down, and their prices are up, respectively, 94%, 51% and 80% from June lows. Today’s PPI report has wholesale prices up 1.1% in December after rising 0.8% in November.
Is Inflation Finally Here?
There were a number of articles Thursday commenting on the producer price index (PPI) numbers saying that “inflation” is upon us because prices are rising. I think we are on the verge of experiencing true inflation, but the PPI is mostly revealing supply and demand factors rather than price inflation.

THURSDAY
China's Foreign Exchange Reserves Jump by Record $199 Billion
Inflation is officially running in China at 5%. Unofficially, estimates are 10% or more. Is it just a matter of time before these costs get passed through?

WEDNESDAY
Former ECB Official Warns About Euro Crisis
Former European Central Bank board member Otmar Issing, a German economist who is one of the ECB’s founding members, had issued a stern warning that the “seemingly unstoppable” movement toward financial transfers from the bloc’s strongest to its weakest members raises economic and political tensions that put monetary union and the single currency at risk.

MONDAY
Can China save the euro?
Just as Europe is desperate for a new source of ready cash, Li has offered up some of China's vast hoard of reserves to support the struggling euro zone through its debt crisis.
Yellen Bluffs
Janet Yellen (Vice-Chair FRB) gave a speech in Denver on Saturday. She did her level best at defending QE.

Reports
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