With today’s unexpected decline in December payrolls, the cry for more job-related stimulus will grow even louder. But the sad truth is that any new stimulus or jobs bills will ultimately swell the ranks of the unemployed, thereby raising calls for an even bigger federal effort. If we are not careful, government regulations, subsidies, and spending, all designed to fight unemployment, could push the labor market into a death spiral.

Thinking about currency and money creation in the past few days has lately caused me to make some thought experiments on world trade, and in particular, the recently proposed idea of a global currency. Now I don’t normally go about making these thought experiments, so please let me know if I am missing something, or making some lapse in causation. If anything, I think I’m beginning to get the arguments of Marshall Auerback.

Tim Duy tries to explain why the Fed might be hesitant to pursue a more aggressive policy stance:

Devil's Advocate, by Tim Duy: Commentators, including myself, have been critical of a Federal Reserve policy stance that appears to place uncertain inflation concerns ahead of a very real unemployment problem.

As we have expected ever since the emergence of the Dubai crisis, sovereign debt problems have come to the fore as a major threat to the global economy and financial system.  The catalyst was renewed fears that Greece and Portugal will not be able to fund their deficits without a bail-out following the failure of a Portuguese bond auction.  As a result world stock markets plunged, Southern European bond yields soared, the Euro plunged and the spreads on credit default swaps (CDS) hit record highs for a number of countries.