Food crisis threatens India – The specter of another food crisis has the whole world nervous. But in India, skyrocketing food prices threaten to send the entire economy into a tailspin, as the government struggles to balance growth and inflation — and create a safety net for the millions still mired in poverty. Government data revealed on Thursday that India’s food inflation topped 18 percent for the week ending Dec. 25, with vegetables prices up more than 50 percent from the same period last year. The steep increase came as a surprise to economists, who had predicted a moderation in prices due to last year’s good monsoon.For India, a spike in food prices means real suffering. But a prolonged and seemingly unstoppable rise in the cost of basic commodities like the one India has witnessed over the past two years could have farther reaching effects.
World Bank Issues Its First-Ever Yuan Bonds – The World Bank said it is issuing its first-ever bond denominated in China’s currency, the yuan, in Hong Kong, as the country promotes international use of its currency, also known as the renminbi.
The World Bank said in a statement dated Monday that it is raising 500 million yuan ($76 million) by issuing the two-year bonds, which pay out 0.95 percent in interest semiannually. It said the money would be added to its normal pool of cash, rather than being raised for a specific purpose.
The bonds are issued by the Washington-based lender’s International Bank for Reconstruction and Development arm and get its "AAA" rating, the highest possible.
2011: Year of the Yellow Brick Road – Let’s enjoy the dream for a moment: the Federal Reserve (Fed) has sprinkled money on the economy, Congress has kept taxes low and we see signs of a recovery. A recovery driven by consumers with more disposable income. Where do they get it from? The reduced payroll tax? Maybe, but how about all the money consumers have at their disposal now that they have stopped paying their mortgage? What a wonderful life this must be! Because the Fed doesn’t quite believe in the recovery, we believe QE2 will run it’s course – Fed Chairman Bernanke has repeatedly stated that one of the grave policy mistakes during the Great Depression was that monetary policy was tightened too early. He appears committed to not letting history repeat itself; investors may want to trust him on that, as well as his commitment to push inflation higher. The challenge the Fed has, of course, is that while it can create asset inflation, the Fed has a difficult time influencing which assets inflate.
Europe sovereign-debt insurance costs rise further – The cost of insuring Western European sovereign debt against default continued to push into record-high territory on Friday. The spread on the five-year Markit iTraxx SovX Western Europe index, which is made up of debt from 15 Western European countries, rose six basis points to 218 basis points, according to data provider Markit. That means it would now cost $218,000 a year to insure $10 million of debt for five years. Worries about upcoming bond issuance by Portugal contributed to the rise, along with an ongoing political stalemate in Belgium, pushing up CDS spreads for both countries. Meanwhile, the spread on the Markit iTraxx Senior Financials index rose 4 basis points to 200, approaching a level last seen in March 2009, after the European Union late Thursday confirmed it was weighing new rules that could require senior debt holders to take writedowns in the event of future bank failures.