China getting worried about the strength of the US Dollar

China has renewed its call for the creation of a super-sovereign currency to reduce the US dollar's domination of the world's monetary system. It is believed they want the Special Drawing Right, the International Monetary Fund's unit of account, to eventually displace the dollar as the principal reserve currency.

In its annual financial stability report, China's central bank did not mention the dollar by name but said it was a serious defect that one currency should tower over all others.

'An international monetary system dominated by a single sovereign currency has intensified the concentration of risk and the spread of the crisis,' the People's Bank of China said.

In a veiled call for the US not to erode the value of the dollar through excessively loose monetary and fiscal policies, the PBOC urged closer supervision of those countries that issue the main reserve currencies.

China is no doubt getting worried about the $1.95 trillion in official currency reserves it has in US dollars. Any further big US budgetary and monetary stimuli may well generate inflation, in turn lowering the purchasing power of the US dollar and handing Beijing big losses on its large portfolio of dollar-denominated bonds.

Increased unemployment lowers oil prices even further

Oil prices have fallen by more than $1 a barrel as rising US unemployment has led to further fears of weakening demand for oil among US consumers. US light, sweet crude settled down $1 at $40.17 a barrel while London Brent slipped 25 cents to $46.21.

The US unemployment rate rose to 7.6% in January, up from 7.2% in December, according to official figures - the highest level since 1992. The rapid rise in unemployment suggests the US recession is deepening. Companies as well as individuals are cutting back on spending.

Officials from the producers cartel, the Organization of the Petroleum Exporting Countries (Opec) have said that current price level is too low for its members to make enough revenue or encourage investment in new supply.

P0rn Again

Despite NBC banning sexually explicit ad content from the Super Bowl broadcast, Comcast somehow goofed with 2:47 left in the game and broadcast a 30-second, X-rated clip—from the adult channel Club Jenna—to about 80,000 subscribers watching the game in the Tucson area. According to The Huffington Post, Comcast suspects the work of hackers.

The company is paying each of its affected customers a $10 refund. Freakonomics asks “How did they decide $10 was the correct amount?”

Furthermore, if $10 is Comcast’s estimation of the damage 30 seconds of porn incurred on the average viewer, should it have paid more to families watching the game with small children, or — since the porn clip interrupted the game right after Larry Fitzgerald’s last touchdown in the game — Cardinals fans? And most importantly, what about the people who enjoy porn? Should they send back the refund — perhaps with an extra dollar or two? :o)

US interest rates now virtually at zero

The US Federal Reserve has tonight slashed its key interest rate from 1% to a range of between zero and 0.25% as it battles the country's recession. Wall Street shares soared after the Fed, the powerful US central bank, stunned markets by cutting interest rates from an already 50-year low of 1% to virtually nothing. In its statement, the Federal Reserve predicted that rates would stay at the current exceptionally low levels "for some time". It added that it was considering ways it could spend money on supporting the economy and credit markets. Analysts said that the key rate is now virtually zero. "Whether it's zero or 0.25% actually does not make a huge difference," said Holger Schmieding at Bank of America. He added that the more important factor is what policymakers plan to do now that they cannot cut interest rates any further.

The Federal Reserve stressed that it was already planning to buy large quantities of additional debt based on mortgages and is considering whether it would be a good idea to buy long-term US government bonds. The strategy of a central bank buying government bonds mirrors the so-called 'quantitative easing' carried out by the Japanese government when it was fighting deflation in the late 1990s and early 2000s.

US jobless queue lengthens

US employers axed 533,000 jobs in November, the biggest monthly cut since 1974, the US Labor Department said. In a dramatic indication of the worsening economic situation, the US jobless rate rose to a 15-year high of 6.7% from 6.5% in October. Since these latest numbers were compiled, further jobs losses have been announced, including big cuts at AT&T. Recent figures have fuelled fears that the world's biggest economy is set for a deep, long downturn. Reacting to the unemployment data, US President-elect Barack Obama said: "There are no quick or easy fixes to this crisis, which has been many years in the making, and it's likely to get worse before it gets better."

The best recession-proof jobs in the US

According to a new book called '150 Best Recession-Proof Jobs', by US Careers' expert, Laurence Shatkin, the best recession-proof jobs are those that are least sensitive to economic downturn, and which have the highest combined scores for pay, projected workforce growth, and number of openings. The top 20 jobs are listed above. Thanks to Time magazine, you can view the whole list here and read an interview with the author here.

When $700 billion just isn't enough

The US Treasury Dept is quickly running out of money to invest in troubled banks. A Time magazine study today shows that nearly one-third, or $216 billion, of the $700 billion that Congress approved to be spent just six weeks ago has already been spent or will soon be spent on just 67 banks. That's a small fraction of the up to 1800 financial firms that are expected to apply for government assistance. It seems very likely that the fund needs to double in size. While the Treasury still has about $480 billion to spend, it's not clear how much of what is left will be used for direct investments into banks.

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US lowers interest rates but does it matter?

Following the Fed's reduction of US interest rates to 1% yesterday, Time magazine analyses whether lowering rates will have any effect - even a reduction to zero, like what happened in Japan in 1999.

"The U.S. Federal Reserve cut its benchmark interest rate by 50 basis points to 1% on Wednesday, continuing an aggressive effort to fend off a deep recession. The rate now stands at the lowest level since 2004 — and central bankers signaled they may resort to more cuts in the months ahead. The hope is that further rate cuts will stabilize volatile financial markets and accelerate the slowing economy. But as the rate heads toward zero, the Fed is rapidly running out of room for reductions. Not only that, economists and analysts are questioning whether rate cuts produce any bang for the buck under the current extraordinary circumstances.

In a normal cyclical slowdown, lowering interest rates encourages fresh business activity by reducing the cost of borrowing from banks. With more borrowing comes more investment, more jobs and more growth. But these are far from ordinary times. Banks, already burdened with bad consumer and commercial debts, are desperate to clean up their balance sheets and avoid risk — they are not eager to take on more risk by issuing new loans against the backdrop of a deteriorating business climate. American consumers, too, are trying to reduce household debt, so borrowing more money for a new car or to remodel the kitchen is not a high priority. And without greater consumer spending, most companies have little need for new loans to expand operations".

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Americans no longer the big spenders

US consumer confidence plunged to a record low in October as consumers felt the bite of the credit crisis. The US consumer confidence index plummeted to 38.0, its lowest reading since the index was launched in 1967 - down from 61.4 in September, and down from 95.2 twelve months ago! The figure has shocked analysts but is it really that surprising with more than 460,000 a week losing their jobs in America and about 6.1% of the workforce now unemployed? Americans have all but stopped spending on discretionary items (non-essential items) such as cars because they are scared of losing their jobs and anxious about the declining value of their homes. The figures do not bode well for American retailers either as they enter into what is meant to be their busy holiday period.

The news increases expectations that the US Central Bank will reduce interest rates this evening to 1% or maybe even 0.75%. Japan and Britain will then probably follow suit before the end of the week. They hope lower interest rates will boost the economy as people will be more likely to borrow and then increase their spending.