Despite ballooning Fed reserves to bail out banks, money supply as measured by the growth in money supply with a zero maturity (notes and coins, check accounts, savings deposits and money-market accounts collectively) continues to slow.

With the US dollar falling down a precipice, spare a thought for non-US investors invested in US stocks and bonds.

The graph below shows the performance of US 10-year Treasury Notes since the beginning of March in both US dollar terms (red line) and euro terms (blue line). Whereas US investors are showing a poor return of -2.8% for the period, European investors are completely under water to the tune of -17.5%. For the year to date the figures are -4.8% (US dollar) and -10.5% (euro). (Although I am using the euro in this example, the same logic applies to most other non-US dollar currencies.)

Northern Trust (NTRS) posted a short comment Tuesday on the Fed’s announcement to reduce the term of discount window loans from 90 to 28 days, effective January 14, 2010. To put this decision in historical perspective, the Fed increased the maturity of discount window loans from overnight to 30 days on August 17, 2007, and again to 90 days on March 16, 2008.

Asha Bangalore, economist of Northern Trust, argued that the need for discount window loans had decreased significantly from the period following the collapse of Lehman Brothers (see graph below). “This [Fed's announcement] marks the beginning of a gradual withdrawal of the extraordinary support the Fed has extended to the global financial system as signs of stability have emerged,” she said.

China’s economy is continuing to grow despite the global recession, helped by a massive government stimulus package of $585 billion. But doubts remain whether such strong growth can be sustained by public spending alone. Al Jazeera’s Melissa Chan reports from Inner Mongolia, where a whole town built with government money is standing empty.

John Ryding, chief economist of RDQ Economics in New York, sits down with Michael Mackenzie, U.S. markets correspondent of the Financial Times, to discuss Fed policy, inflation versus deflation and the U.S. employment outlook.

Part 1: On Fed policy
Ryding says the Federal Reserve will not raise interest rates until 2011 at the earliest. He says an extended period of easy monetary policy is laying the ground for the next bubble and that the Fed itself is engaged in the biggest carry trade out there through its policy of quantitative easing.

In the 60 years since Chinese nationalists moved to Taiwan, the country has grown up in a very different way from mainland China. Matthew Rivera reports from Taiwan on how culture, democracy and economics there offer an alternative China.

“Words from the Wise” this week comes to you in a shortened format as I do not have access to my normal research resources while on the road in Europe. Although very little commentary is provided, a full dose of excerpts from interesting news items and quotes from market commentators is included.

While the Dow Jones Industrial Index and other benchmark indices reached 52-week highs last week and pleased Wall Street, the cartoonists reminded us that worrisome economic issues remained in Main Street …

The Dow Jones Industrial Average has recorded a gain of 56.9% since the current rally commenced on March 10 - 176 trading days ago. In order to put the rally in historical perspective, Chart of the Day has provided a handy graph on which all major market rallies since 1900 are plotted.

Each dot on the graph below represents a major stock market rally as measured by the Dow and shows the Average began a major rally 27 times over the past 109 years, i.e. an average of one rally every four years.

Asia has proven comparatively resilient against the current downturn, but hurdles still lie ahead. In order to maintain robust growth rates in the face of weak U.S. demand, the region’s dynamic economies must stoke domestic consumption and embrace environmentally sustainable development policies. So says Stephen Roach, chairman of Morgan Stanley Asia and author of The Next Asia: Opportunities and Challenges for a New Globalization. Clay Chandler, Asia editor with McKinsey’s publishing group, spoke to Roach in Hong Kong.

The video clips below provide a handy summary of the reports expected on the economic, financial and corporate front around the globe during the week ahead.

US: Retail results, economy in focus Retailers including Home Depot (HD) and Target (TGT) will report results and key economic data will include retail sales and industrial output. Meanwhile, nine speakers from the Federal Reserve will offer their views on the economy.

In this video clip, Marshall Auerback, Global Portfolio Strategist of RAB Capital, discusses with Brian Sullivan of Fox News how the U.S. economy is comparable to Japan.

Watch the latest business video at <a href=”http://video.foxbusiness.com/” mce_href=”http://video.foxbusiness.com/”>FOXBusiness.com</a>

I have just arrived in Geneva after an exhausting but hugely successful few days in Ljubljana, quaint capital of Slovenia. It is rather difficult to write proper posts while on the road, but I will do my best to feed interesting snippets through - that is, when not investigating how the gnomes see the future of Swiss banking.

Gold hit a new peak after a drop in the U.S. dollar to a 15-month trough, resulting in the precious metal recording an eight-day winning streak. According to Bespoke, the current run represents the seventh time since 1980 that gold has had a streak of eight or more consecutive days with a gain. The report said:

In this post, Charlie Rose interviews Kenneth Rogoff, professor of economics at Harvard University, on the economy.

Charlie Rose sits down with Kenneth Rogoff.

One of the most incisive thinkers in the investment field is David Fuller who runs the Fullermoney service from London and provides daily written and podcast commentary. I have been subscribing to the service for more than 20 years and consider it part of my staple investment diet, particularly also for its truly global approach. I am not an agent for David, but please visit by his site to get a feel for his excellent commentary.

The paragraphs below from Monday’s Fullermoney report are particularly topical at this juncture in stock markets.

This week on WealthTrack Consuelo Mack sits down with global investor Dennis Stattman, founding manager of the BlackRock Global Allocation Fund. Now in its 20^th year, this Morningstar favorite has consistently delivered market and peer beating returns with less risk. In a wide ranging discussion, Stattman discusses the investment perils and opportunities he is tracking around the world.

Nigel Rendell, emerging market strategist of RBC Capital Markets, talks to Izabella Kaminska of FT Alphaville about a broad spectrum of emerging-market related issues.

Part 1:
Rendell talks about the differing fortunes of economies from Russia to Argentina. He says Brazil remains a great pick outside Asia.

Watch the video below to see what the patterns in the stock market charts suggest to technical analyst Louise Yamada.

The transcript of Consuelo Mack’s recent interview with erudite, articulate, funny and opinionated Jim Grant has just been published.

Click here for the text. This is must-read material.

Richard Koo, the world-renowned chief economist of Nomura Research Institute, discussed the lessons learned from Japan’s “lost decade” during a presentation at Center for Strategic and International Studies (CSIS). During his discussion, Koo suggested that government stimulus can play a key role in alleviating the problems of a balance sheet recession. Koo’s recent book, “The Holy Grail of Macroeconomics: Lessons from Japan’s Great Recession”, discusses these issues in greater detail.

“Words from the Wise” this week comes to you in a shortened format as I am about to leave Cape Town for a visit to the colder environs of Switzerland and Slovenia. Although reduced commentary is provided, a full dose of excerpts from interesting news items and quotes from market commentators is included. Blog posting will be slow (and totally absent on some days) while I am on the road. The normal blogging service will be resumed on my return to Cape Town on November 16.

The Federal Open Market Committee (FOMC) maintained its extraordinarily accommodative monetary policy following its meeting on Wednesday. The communiqué had no surprises and said that the committee expected to keep the fed funds rate target in the 0-0.25% range “for an extended period”. As expected, the European Central Bank (ECB) and the Bank of England (BoE) also kept interest rates unchanged at 1% and 0.5% respectively.