AccentedTouch

In a surprise move, the central bank of China has raised the required reserves of lenders on January 14, 2011. This would be the fourth instance of raising reserves in a mere two month period. Such drastic actions have been taken as a means of combating inflation which has become the main priority of China’s treasury over the past year.

The intended goal here is to solidify cash reserves in the banks by force. This is intended to keep money out of the economy in order to get prices under control. As a result, concerns arise over the social unrest that might occur.

Such an approach is considered a radical departure from the one China previous embodies which was considered a more moderate approach to finances.

It is no secret that inflation continues to grow in China and in many ways it is not an unexpected outcome. The new approach by Beijing can be considered a drastic tactic to reign in such problems.

The FDIC and the First Southern Bank of Boca performed a transition that would not damage the local bank’s customers. The FDIC insures deposits up to $250,000.

This is the first commercial bank to fail in the US in 2011. The cost to the FDIC is estimated to be $78 million.  In the past 20 years, only one other Orlando bank has failed.

Ranked as the second largest Orlando bank, it punctuated a dramatic rise and fall in its history. Deposits peaked in 2007 during the real estate boom with over $720 million in assets. As the market crashed, the bank was hit with many bad loans from real estate transactions. Over 75% of its capital was lost in the last year. Efforts to raise capital proved fruitless and the bank closed.

The financial interest in China has been high enough to attract the attention of major investors such as McDonald’s and the US based Caterpillar company, but now it appears that the investment demand is pushing interest in China’s currency to new heights as well. Beijing has made it known that they want Hong Kong to become a bigger player in the world’s finance and banking. Now the World Bank is helping China realize these ambitious goals.

This week the World Bank has announced that preparations have been made for the issuance of Chinese yuan bonds. This will be the first time that this global financial institution has ever debuted these types of investment bonds in Chinese currency.

These yuan bonds will make their world debut in Hong Kong where the government is hoping to promote more international interest in its currency. The hope is that the sale of these new bonds will generate more than $75 million US dollars, or 500 million in yuan currency. The bonds will be for a two-year period and owners will earn 0.95% semi-annual interest.

London and Sydney trades are still closed. On the other hand, New York trading has been limited. Harsh, cold weather is said to keep most traders at home during the recent Christmas holidays, with many traders extending their holidays, expected to last until after new year.

Spot gold was at $1,390 per troy ounce, but traders were not buying above the price level, since it is almost the end of the year and traders do not want to start 2011 with a high price of gold. Spot silver was at $29.36 per ounce, while spot platinum was at $1,739.50 per ounce. Spot palladium was at $769.13 per ounce.