Monetary News Feb. 7 - 11

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News
FRIDAY
Pact of uncompetitiveness
Dangers lurk in Franco-German plans for a more tightly integrated euro zone.
IMF calls for dollar alternative
The IMF said Special Drawing Rights, or SDRs, could help stabilize the global financial system.
Fed’s Warsh Quits; Bernanke Adviser Questioned QE2
Federal Reserve Governor Kevin Warsh, who was one of Chairman Ben S. Bernanke’s closest financial-crisis advisers before becoming the only governor to question the expansion of record monetary stimulus in November, resigned after five years at the central bank
Hopes raised, punches pulled
European leaders look set to fudge the latest test of their resolve.

THURSDAY
Inflation concerns push bond rates higher
Treasury yields continued their general trek higher this week, with the benchmark 10-year hitting its highest level since last April on Tuesday.
Fed chief says inflation not a threat to U.S.
Republican lawmaker disagrees, saying Fed won't see it until it's too late.
Our dollar, China's $2 trillion problem
Could the United States and China be even more co-dependent than we thought?
Weber Says ECB Will Act If Inflation Expectations Increase
While rates are “appropriate” for now and the ECB still expects the inflation rate to fall below 2 percent, “we will very closely monitor any potential deviation” to consumer price expectations “and act appropriately,” Weber said in a speech in Vienna today.
Bank of England Maintains Aid as Inflation Accelerates
The Bank of England kept up emergency stimulus as officials tolerated the prospect of inflation accelerating to a two-year high to nurture Britain’s economic recovery.
Bernanke Making Sure Fed Governors Remind Congress Deficit Bigger Than QE2
Federal Reserve Chairman Ben S. Bernanke is trying to make sure the U.S. central bank doesn’t become a scapegoat for fiscal profligacy.

WEDNESDAY
Bernanke to face sharp questions from Republicans
Federal Reserve Chairman Ben Bernanke's first appearance before the House since Republicans took control last month is likely to be a tough one. And much of the grilling will probably come from members of his own party.
Fed's Fisher vows to oppose QE3
Rising commodity prices have brought the hawks at the Federal Reserve out in full throat.
The Miles Higher club
The Bank of England houses some of the most trenchant critics of Britain’s big banks. In most countries policymakers are broadly satisfied with the new Basel 3 accords, which govern the size of firms’ capital buffers. But top officials at the bank, including its governor, Mervyn King, and Andrew Haldane, have criticized the rules as being far too puny.

TUESDAY
China Raises Key Interest Rates to Counter Inflation
China raised interest rates for the third time since mid-October ahead of a report forecast to show inflation accelerated to the fastest pace in 30 months.
Lacker Says FOMC Should `Seriously' Re-evaluate Stimulus Plan
Federal Reserve Bank of Richmond President Jeffrey Lacker said the quickening U.S. recovery means policy makers need to take “quite seriously” their commitment to review a $600 billion monetary-stimulus program.

MONDAY
Euro Buys Merkel Time as Bund-Treasury Spread Widens
The highest yields on German short- term bonds in two years relative to Treasuries are boosting the euro, easing pressure on Chancellor Angela Merkel as Europe’s leaders consider expanding a rescue program to end the region’s debt crisis.
Bernanke Bets Commodities Won’t Fan Inflation Concern
Investors are betting with Ben S. Bernanke that surging food and energy prices won’t accelerate U.S. inflation, allowing him to maintain easy money.
Geithner Says Brazil Draws Funds as Other Nations' Currencies Undervalued
Treasury Secretary Timothy F. Geithner said Brazil is getting a disproportionate share of capital inflows because other countries keep their currencies undervalued.
U.S. faces $70 billion inflation hit
Rising food and energy prices could deal a $70 billion blow to the economy, but the recovery is likely to limp along anyway.

Economist Comments
FRIDAY
Monetary Inflation, Supply Concerns Drive Commodities More So Than Demand
Monetary inflation creates artificial demand, which triggers higher prices; lack of production also eventually leads to much higher prices.

THURSDAY
Dual Mandates, the Price of Gold, and Competing Theories on Fed Policy
The only thing the Fed can directly control is short-term interest rates or money supply. Dual and triple mandates are bunk.
China's New Years Resolution: Don't Fight Inflation With Interest Rates
Soft interest rate movement is proving ineffective in controlling China's rampant inflation.

TUESDAY
The "Matrix" Market: Effects of Quantitative Easing, High Frequency Trading
The Federal Reserve and big banks are creating the illusion of healthy equity markets despite massive retail equity withdrawals in the years following the financial crisis.
The Bernanke-bashing bubble
If the Fed is out of ammunition, can Ben Bernanke really riddle the globe with inflationary slugs?
Inflation Always Steals the Benefits of Devaluation
Though it's very incorrect, the prevailing view inside the political, media and economic establishment is that a weak dollar is helpful to commerce for it boosting the exporting capabilities of U.S. manufacturers.
Get Ready for Rising Rates, Falling Bonds
The financial markets are voting for higher rates on long-term Treasuries. And don't be surprised if the Fed ups short-term rates later this year.
On the Down Grade
The question then becomes, how high must U.S. debt climb in order to make a downgrade inevitable?
US CPI Inflation: Expect 2.5% Jump in March
January's ISM PMI price indices for both manufacturing and non-manufacturing have risen to their highest levels since August 2008.

MONDAY
Fed, QE2 Cannot Be Blamed for Egypt Protests
The displeasure over the Hosni Mubarak government has been linked to the rising price of wheat, and that in turn has been linked to our money printing in general and to Ben Bernanke's August warning of QE2.

Blogs
FRIDAY
The Economist commodity-price index
Quick look at commodity-price index changes in February.
Rogoff and Rajan Discuss Risks of Currency War
Speaking at a seminar sponsored by the Council on Foreign Relations, Rogoff said that despite all the talk of “currency wars,” the world has so far kept trade relatively free since the economic crisis of 2008-2009.
Indonesia's bank shot tightening strategy
A recent increase in inflation expectations is being caused by supply constraints and an increase in incomes. The central bank can counteract some of that increase in demand by raising interest rates or letting the rupiah rise
How the Fed is bribing its way to your heart
With bailouts for banks and handouts for the poor, is the government just trying to buy the affection of Americans?
Don't forget about Europe
Over the past week, bond yields are up again, and yesterday yields on Portugal's debt hit a new high.

THURSDAY
Secondary Sources: Inflation, Foreclosures, Ron Paul
A roundup of economic news from around the Web.
Paul Ryan's Republicanomics
In his opening statement, Mr Ryan acknowledged that "these cost pressures have not yet been passed along to consumers"—emphasis on "yet"—before worrying aloud that Mr Bernanke and his Fed minions threaten to wreck the economy.

WEDNESDAY
Fed’s Lockhart Plays Down Inflation Pressures
Noting “inflation anxiety is rising,” a key Federal Reserve policy maker sought to calm nerves and said broadly speaking price pressures remain low, in remarks that explained the limitations the central bank faces when trying to achieve price stability.
How big a threat are rising prices?
In 2007 and 2008, before the world was swept by financial panic, the biggest global economic threat appeared to be a sharp and sustained rise in commodity prices. Soaring oil costs rattled rich world consumers while a spike in food prices battered the world's poor. Prices tumbled during the crisis but have crept up again in recovery.
How big a threat is inflation?
Is inflation, and commodity price inflation especially, currently a threat to economic growth or political stability? How should central banks, in the rich world and in emerging markets, handle the rise in commodity costs?

Reports
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