With the holidays fast approaching, here are the top 5 for the week.
1. China’s inflation is soaring, but China didn’t raise interest rates. As rumored, China’s CPI came in smokin’ hot at 5.1% and was a 28 month high for the nation. (PPI was up 6.1%.) Food was the big driver of higher costs and was up 11.7% in the month. History buffs know that the last political change in China occurred due to runaway inflation and a rising up of the population against the incumbent politicos. The good news is that the PBOC (People’s Bank of China) did not raise interest rates and appears to be content with using regulatory and reserve requirements to manage policy. The other good news was that the targeted volume of banks loans for 2011 will be 7 trillion renminbi (or higher). Both of these facts led Chinese equities markets to rally 3% today.
2. Despite the rhetoric from the left, Democrats in Congress are likely to passPresident Obama’s tax cut extension and spending bill. Last week, House Democrats were angry about not being included in the compromise discussions the president had with Republicans and voted amongst themselves not to bring the bill up for a vote in their chamber. However over the weekend, there have been reassuring comments of the bill’s passage from Obama’s chief political strategist David Axelrod and from the Senate Majority whip Dick Durbin. The Senate votes for cloture today on the bill and should pass it by Wednesday. Then it will be up to the House and Nancy Pelosi to bring the bill up and vote on it. I expect it to pass this week. By doing so, the United States will be the only major industrialized economy not to move towards reducing fiscal deficits in 2011.