Renminbi

• JPMorgan Leads Job Cuts as Banks Seek to Bolster Profit (BBG)
• North Koreans don't show for work at Kaesong factory park (Reuters), as NK urges foreigners to leave South Korea (FT)
• Lisbon Struggles to Close New Budget Gap (WSJ)
• Portugal may face delay to bailout funds (FT)
• Putin Squeezing Out UBS to Deutsche Bank Using Oligarchs (BBG)
• China's Xi Says Fast Growth Over (WSJ)
• Spain’s PM wants more powers for ECB (FT)
• Bernanke Says Interest on Reserves Would Be Main Tightening Tool (BBG)
• Bird Flu Claims 7th Victim in China (WSJ)
• Texting While Flying Linked to Commercial Helicopter Crash (BBG)... No, Bernanke wasn't the pilot

A month ago we pointed out that as a result of Australia's unprecedented reliance on China as a target export market, accounting for nearly 30% of all Australian exports (with the flipside being just as true, as Australia now is the fifth-biggest source of Chinese imports), the two countries may as well be joined at the hip. Over the weekend, Australia appears to have come to the same conclusion, with the Australian reporting that the land down under is set to say goodbye to the world's "reserve currency" in its trade dealings with the world's biggest marginal economic power, China, and will enable the direct convertibility of the Australian dollar into Chinese yuan, without US Dollar intermediation, in the process "slashing costs for thousands of business" and also confirming speculation that China is fully intent on, little by little, chipping away at the dollar's reserve currency status until one day it no longer is.

If we shed our fixation with the Fed and look at global supply and demand, we get a clearer understanding of the tailwinds driving the U.S. dollar higher. I know this is as welcome in many circles as a flashbang tossed on the table in a swank dinner party, but the U.S. dollar is going a lot higher over the next few years. In a very real sense, every currency is a claim not on the issuing central bank's balance sheet but on the entire economy of the issuing nation. All this leads to two powerful tailwinds to the value of the dollar. One is simply supply and demand: as the global economy slides into recession, trade volumes decline, and the U.S. deficit shrinks. (It's already $250 billion less than was "exported" in 2006.) That will leave fewer dollars available on the global market. The second tailwind is the demand for dollars from those exiting the euro and yen. The abandonment of the euro is already visible in these charts.

• Dimon’s ‘Harpooned’ Whale Resurfaces With Senate Findings (BBG)
• Greece and lenders fall out over firings (FT) - as predicted 48 hours ago
• Dallas Fed Cap Seen Shrinking U.S. Banking Units by Half (BBG) - which is why it will never happen
• Xi elected Chinese president (Xinhua)
• Russia Bond Auction Bombs as ING Awaits Central Bank Clarity (BBG)
• U.S. and U.K. in Tussle Over Libor-manipulating Trader (WSJ)
• Chinese firm puts millions into U.S. natural gas stations (Reuters)
• In Rare Move, Apple Goes on the Defensive Against Samsung (WSJ)
• Berlin Airport Fiasco Shows Chinks in German Engineering Armor (BBG)
• Ex-PIMCO executive sues firm, says was fired for reporting misdeeds (Reuters)
• Bank of Italy Tells Banks in the Red Not to Pay Bonuses, Dividends (Reuters)

This week's events show that the Chinese government realises that its stimulus efforts have got out of hand and its economy is in trouble.

• When the cash runs out: Nokia to Omit Dividend for First Time in 143 Years (BBG)
• Passing Debt Bill, GOP Pledges End to Deficits (WSJ)
• Japan logs record trade gap in 2012 as exports struggle (Reuters)
• so naturally... Yen at 100 Per Dollar Endorsed by Japan Government’s Nishimura (BBG)
• Japan rejects currency war fears (FT)
• In Amenas attack brings global jihad home to Algeria (Reuters)
• Investors grow cagey as Italy election nears (Reuters)
• Mafia Victim’s Son Holds Key to Bersani Winning Key Region (BBG)
• Bernanke Seen Pressing On With Stimulus Amid Debate on QE (BBG)
• U.S. to lift ban on women in front-line combat jobs (Reuters)
• Red flags revealed in filings of firm linked to Caterpillar fraud (Reuters)
• Apple Sales Gain Slowest Since ’09 as Competition Climbs (BBG)
• Spanish Jobless Rate Hits Record After Rajoy’s First Year (BBG)
• North Korea Threatens Nuclear Test to Derail U.S. Policies (BBG)

Courtesy of Diapason's Sean Corrigan, here are some 22 charts taking us around the world's markets and back.

Demand for gold is likely to rise as the world heads towards a multi-currency reserve system under the impact of uncertainty about the stability of the dollar and the euro, the main official assets held by central banks and sovereign funds. This is the conclusion of a wide-ranging analysis of the world monetary system by Official Monetary and Financial Institutions Forum, (OMFIF), the global monetary think-tank, in a report commissioned by the World Gold Council, the gold industry’s market development body. The report warns of “twin shocks” to the dollar and the euro and of a “coming dollar shock” and points out how gold would be a safe haven in a dollar crisis. “Gold has a lot going for it; it correlates negatively with the greenback, and no other reserve asset seems safe from the coming dollar shock.” “The world is preparing for possible twin shocks from the parlous. position of the two main reserve currencies, the dollar and the euro... The OMFIF offers a confidential, convenient and discreet forum to a unique membership of central banks, sovereign funds, financial policy-makers and market participants who interact with them. They note that “western economies have attempted to dismantle gold's monetary role. This has failed.”

The Chairman of China Securities Regulatory Commission (similar to the US SEC) said that China can increase by 10-fold the size of the two main channels by which foreign investors buy mainland financial assets. It can, Guo Shuqing said, increase quotas under the Qualified Foreign Institutional Investors and the Renminbi Qualified Foreign Institutional Investors. The latter would make it easier for the yuan in Hong Kong (CNH) to be used to purchase Chinese securities. This hint helped lift China shares by over 3%, their largest gain in a month. The Shanghai Composite's 3% rise brings the gain to 19% off the multi-year low near 1949 (the year of China's Revolution) in early December.

As China's major trading partners try to control rising public pension and health care costs, they may not realize they also have an important stake in China's ongoing struggle to fashion a safety net for its own rapidly aging population. Many observers assume China has no pensions or healthcare insurance for the 185 million people over the age of 60 (13.7% of population), the highest official retirement age for most workers. They may well believe this explains why Chinese families save so much–more than 30% of household income–and therefore spend less on consumer goods, including imports from trading partners.

There are seven items that will be on the radar screen of global investors in the week ahead. 1. There is confusion over Fed policy. Despite the leadership (Bernanke, Yellen and Dudley) demonstrating their unwavering commitment to use heterodox monetary policy in an attempt to promote a stronger economy in the face of household de-leveraging and fiscal consolidation, many have read the FOMC minutes to imply an early end to the $85 bln a month in long-term asset (MBS and Treasuries). That December meeting was historic not because it marked the beginning of the end of QE, but the exact opposite, the nearly doubling monthly purchases and the adoption of macro-economic guidance (6.5% unemployment and 2.5% inflation) before rates are lifted.

26-year-old Hu Bin is China's most popular online market commentator - just four years after starting his blog. As Bloomberg BusinessWeek notes, his success started when Premier Wen Jiabao announced a 4 trillion renminbi rescue plan and as 'Commander in Chief of the Stock Market Army' Hu says "I knew I just needed to be clever and use this chance of high liquidity in the market to make myself famous." The brash, eccentric, and outspoken blogger is among the Top 10 most influential people on the Chinese stock market (though under his alias 'Yerongtian' - though preferring the nickname 'Batman') and notes that "any eccentric behavior would attract people's attention. If you understood this vital point, you could control  people's minds." Hu says he is not a financial rabble-rouser adding that "the stock market in the US is managed by regulations; the Chinese market is managed by humans. The 72 million 'retail' Chinese investors aren't as mature as American investors, and I write to meet their immediate needs." While recognizing the irresistible pull of stocks, he understands he's giving advice to people he knows probably shouldn’t be in the market but are going to invest anyway.  What's Chinese for BooYaa?

Our biggest concern here on the cusp of 2013 is the current odd combination of extreme complacency about the risks presented by extend-and-pretend macro policy making and rapidly accelerating social tensions that could threaten political and eventually financial market stability. Before everyone labels us ‘doomers’ and pessimists, let us point out that, economically, we already have wartime financial conditions: the debt burden and fiscal deficits of the western world are at levels not seen since the end of World War II. We may not be fighting in the trenches, but we may soon be fighting in the streets. To continue with the current extend-and-pretend policies is to continue to disenfranchise wide swaths of our population - particularly the young - those who will be taking care of us as we are entering our doddering old age. We would not blame them if they felt a bit less than generous. The macro economy has no ammunition left for improving sentiment. We are all reduced to praying for a better day tomorrow, as we realise that the current macro policies are like pushing on a string because there is no true price discovery in the market anymore. We have all been reduced to a bunch of central bank watchers, only ever looking for the next liquidity fix, like some kind of horde of heroin addicts. We have a pro forma capitalism with de facto market totalitarianism. Can we have our free markets back please?

Pathway to depression.