Monetary News Feb. 14 - 18

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News
FRIDAY
Bernanke worries about cash bubble
Federal Reserve Chairman Ben Bernanke said Friday that unbalanced flows of money between nations is again posing a risk to the global economy and financial stability.
Bernanke: Don’t blame easy money for capital swings
Fed chief defending monetary policies in advanced economies against criticism.
China Raises Bank Reserves to Fight Inflation
The fifth such increase since October will force the country's biggest lenders to lock up a record amount of their deposits at the central bank, removing cash from the economy that otherwise would be pressuring prices higher.
Inflation rate: why prices are rising on everything from cornflakes to socks
The Consumer Price Index, a measure of the inflation rate, rose 0.4 percent in December and January. This is the first time the CPI has increased this much for two straight months since 2008.
ECB Said to Expand Purchases of Portuguese Government Bonds; Yields Slip
The European Central Bank expanded purchases of Portuguese government bonds, according to two people with knowledge of the transactions.
Split in Economy Keeps Lid on Prices
The pace of consumer price increases in the U.S. is quickening after being dormant for months. But a tug of war between the prices of goods and the prices of services, playing out beneath the surface, could keep inflation from becoming the worry it is in China, Europe and many emerging markets.

THURSDAY
Coming soon to U.S. shores: Higher prices
As inflation spreads across the developing world, household needs could soon be more expensive for American consumers too.
Fed Officials Split on Stimulus, Disappointed on Job Growth
Federal Reserve officials differed last month over whether more signs of strength in the U.S. recovery would warrant reducing or slowing record monetary stimulus even as they affirmed disappointment with job growth.
Food and gas drive prices up in January
The U.S. Consumer Price Index, a key measure of inflation, increased 1.6% over the past 12 months ending in January, up from 1.5% in December, the Bureau of Labor Statistics said.
Fed’s Bernanke backs financial reforms
Fed chief says moving swiftly to put provisions into action.

WEDNESDAY
U.S. to press China on currency
U.S. officials will continue to press China over the manipulation of its currency at this week's G-20 summit, a senior Treasury Department official said Tuesday.

TUESDAY
UK Inflation Surges to 4%, Highest Since Nov. 2008
British consumer price inflation surged to double the Bank of England's target in January, official data showed on Tuesday, raising pressure on the central bank to look seriously at increasing interest rates.
Chinese consumers squeezed by rising prices
China's consumer price index rose 4.9% in January, up slightly from 4.6% growth in December, according to data released by the Chinese government Tuesday morning.

MONDAY
France wants new global finance system
France will help the transition to a global financial system based on 'several international currencies', the French Economy Minister said today.
Can Ron Paul crush the Federal Reserve?
For decades, he's crusaded against monetary policy; now he's calling the shots.
How overseas inflation could hurt investors
Inflation isn't hitting your wallet hard, but it is lurking in your stock portfolio. Fast-growing economies in places like China, Brazil and India are growing too fast -- at more than 5 percent a year. That is resulting in higher prices for raw materials and consumer goods, leading to interest rate hikes.
Going, going, dong
IT’S only been a few weeks since the Vietnamese Communist Party’s 11th Congress declared that everything was fine and dandy with the rapidly developing nation—yet on Friday February 11th came yet another devaluation of the currency, signaling that the economic outlook is indeed as precarious as many of us had feared.

Economist Comments
FRIDAY
Effects of Food Costs, Inflation, and Monetary Policy on Developed Markets
What the relationship between these factors could mean for the US, the UK, and Germany.
Deja Deflation Fear
Whatever happened to deflation? You'll remember only a few months ago the Federal Reserve used the fear of falling prices to justify its QE2 program of further monetary easing. Yesterday the government reported that consumer prices rose 0.4% in January, the same rate as in December. The price index is up 1.6% in the last 12 months, but it is also accelerating—up 3.2% in the last six months and 3.9% at an annual rate in the past quarter.
A Chinese Gold Standard?
There is a controversial theory percolating in the gold community that China wants the yuan to become the world's reserve currency and is buying gold and silver in order to do it.
The Inflation Sensation
Here's how to adjust your portfolio for an inflationary environment.
3 Economic Benefits of Deflation
Since the general public is never exposed to the "virtuous" side of deflation, I will devote a commentary to briefly summarizing the many, powerful economic benefits, which can only be realized when the ("free market") forces of deflation are allowed to operate in our economies.

THURSDAY
Why inflation hawks are still grounded
Squawk all you want about surging food prices. The inflation doves are still in control at the central banks.
A Standard-of-Living Shock Is the Danger
The threat of inflation is real. It is just a different threat than many realize.
JANUARY PPI
The Producer Price Index (PPI) increased 0.8% in January, matching consensus expectations. Producer prices are up 3.6% versus a year ago.

WEDNESDAY
U.S. economy healthier, not yet well says Fed’s Dudley
The U.S. economy is heading in the right direction and will pick up steam over the next two years, but high unemployment and low inflation still paint an unsatisfactory picture, New York Federal Reserve President William Dudley said on Monday.
What To Do as Yuan Revaluation, Quantitative Easing Programs Repeat
Ignore China's various interest rate hikes and watch for QE3.
Inflation 101
The unhappy fact is that, over the past 34 years, the dollar has lost 73 percent of its value to inflation.
Inflation: It's Here
How to accurately calculate price inflation and how to prepare for what's next.
Reagan’s Monetary History
The Reagan-Volcker plan got us out of the 1970s, no small feat, but it did not evolve into a long-term stable, successful monetary policy. This was apparent by the time Reagan left office, when the dollar’s slide contributed to the stock market crash of 1987 and high interest rates triggered the savings and loan meltdown.

TUESDAY
Can Monetary Policy Really Create Jobs?
The first decade of this century had the lowest rate of economic growth of any decade since the Great Depression. Employment growth was the lowest in six decades. Inflation-adjusted equity prices fell sharply. In large part, this reflects faulty government policies.
Finding Discrepencies in Arguments of the Inflation Camp
Prices of commodities are rising, yet we don't see employment, wages going up. Where do inflationists think the funds for increased prices will come from?
Auditing the Fed
Senator Rand Paul and Representative Ron Paul are right to seek increased oversight of the Federal Reserve’s monetary policy, but their legislation is an inefficient means to that end.
Fed dictator Bernanke needs to be toppled
Fed boss Ben Bernanke is the most dangerous human on earth, far more dangerous than Hosni Mubarak, Egypt’s 30-year dictator, ever was. Bernanke rules a monetary dictatorship that will trigger the coming third meltdown of the 21st century.

MONDAY
Roubini’s Next Crisis Is Scary Food for Thought: William Pesek
Forget Egypt for a moment. Skip the water crisis in China. Look past angst on the streets of Bangladesh. If you want to see how extreme the effects of surging food prices are becoming, look to wealthy Japan.
Global Economic Recovery Sparks Inflation Fears
The benefits for global trade, especially for U.S. exports, are clear, but this new phase of the upturn also brings new risks. Inflation is picking up in China and other emerging-market economies, as well as in Britain, and the world’s central banks have taken notice.
Treasury Report: Inflation in China and its Consequences in the US
The measures the Chinese government is taking to combat inflation -- wage controls, credit limits, targeted taxes -- can be seen as trade warfare.

Blogs
FRIDAY
Where Are Prices Rising?
The Journal’s Jon Hilsenrath and Justin Lahart report today that a tug of war between the prices of goods and the prices of services, playing out beneath the surface, is keeping U.S. inflation muted.

THURSDAY
The latest Fed projections
The Fed appears to have a preferred recovery path. Early in the crisis, the Fed cut rates to near-zero and initiated a policy of security purchases designed to boost the economy. By last 2009 and early 2010, the Fed's messaging switched to discussing exit strategies, signalling that it was comfortable with the trajectory it was forecasting at the time.

WEDNESDAY
Would Britain have been better off with the euro?
The euro was a bad idea, but the Bank of England hasn't been particularly competent in 2000s either.
Ben Bernanke is no magician
He promised to lower mortgage and corporate bond rates, but quantitative easing doesn't work like magic.
Is the Chinese yuan becoming a rival to the dollar?
China's controversial currency, the yuan or renminbi (RMB), is still too tightly controlled to be a major factor in international markets. But at the same time, Beijing has made a surprising amount of progress in recent months in its aim of internationalizing its currency. The yuan is showing up a lot more often in trade and finance.
A Note On Inflation: It’s Here
We should see a rather sluggish overall economy because monetary inflation causes the further destruction of real capital. Monetary inflation distorts the business cycle, sends the wrong signals to business people, and they embark on projects that will ultimately amount to bad investments based on paper rather than wealth.
Fed’s Lacker Warns More Easing Would Lead to Inflation
A top Federal Reserve official Tuesday warned that any move by the central bank to reduce unemployment could lead to inflation, indicating he would oppose any further policy easing by the Fed to try and boost U.S. economic growth.

TUESDAY
Inflation revisionism
So it is that China's National Bureau of Statistics (NBS) today published a revised set of inflation figures, dating back to the beginning of last year. The number that grabbed the most attention was the latest one, showing that consumer prices rose by 4.9% in the year to January. Most China-watchers were expecting a figure well over 5%.
Bad but not shocking
Britain's January inflation figures were bad but (unlike in previous months) were at least unsurprising. The headline rate, based on the consumer-price index, rose from 3.7% to 4%, in line with City forecasts. The two main factors pushing up inflation were last month’s increase in VAT and the feed-through from costlier crude oil to petrol prices, which reached a record £1.27 a litre.
Indicators show Greek economy is weakest in Eurozone
Industrial production, consumer confidence, and business confidence are all in bad shape.

MONDAY
Consumers Turning Into Inflation Hawks
Consumers see more inflation ahead. That views puts them at odds with Federal Reserve officials and private sector economists.
FOMC Minutes Preview
I expect the FOMC to have revised up their GDP forecast for 2011, revise down their forecast for the Q4 2011 unemployment rate, and perhaps a small upward revision to their inflation forecast. The following table shows the November forecasts:
Bernanke’s Confusion Is Our Economic Ill Health
A weak, inflationary dollar is an economic weight simply because the profits that drive wealth creation are, as John Stuart Mill long ago noted, the remuneration of abstinence. When we save we provide capital to risk-taking entrepreneurs, but with the dollar suffering from unceasing Washington neglect, there’s no incentive for those with the means to fund economic advancement to delay their consumption of capital.

Reports
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