By Bob Blandeburgo Associate Editor Money Morning

On the last leg of his four-nation tour in Asia, U.S. President Barack Obama revived the issue of a still-pending free-trade agreement signed in 2007 with South Korea (KORUS FTA), but an auto trade imbalance will continue to be a major obstacle to Congressional approval.

At a news conference in Seoul, President Obama and Korean President Lee Myung-bak, both showed willingness to renegotiate elements of the deal and to have both countries ratify it as soon as possible.

“I am a strong believer that both countries can benefit from expanding our trade ties,” President Obama said. “I have told President Lee and his team that I am committed to seeing the two countries work together to move this agreement forward.”

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Reports have emerged following yesterday's meeting between 'comfortable' duo Vladimir Putin and his Ukrainian counterpart, Yulia Tymoshenko.  Bloomberg says Putin's announcement that Ukraine would not be penalized for consuming less gas than was contracted was warmly received by Tymoshenko, who pledged that payments would be made on time.  'It would be very good to meet the New Year without calamities,' Putin said, guaranteeing stable supplies (click here for some transit figures).  This exchange was overshadowed by Medvedev's advisor in Moscow, who reportedly complained about 'political blackmail' in light of Tymoshenko's decision to increase transit fees earlier this week. The Guardian points out that TNK-BP's new chief executive, the choice of its oligarch board, is 'inexperienced', but BP insists that it was not 'steamrollered' into accepting him.  Russia's stepped-up pledge for emissions reductions is drawing positive reports.  ...

Don Miller, Associate Editor of Money Morning, reviews the process and implications of the Fed’s possible plan for raising intereste rates without actually raising the rate itself.

Don Miller (Money Morning): The U.S. Federal Reserve may take an unorthodox approach to raising interest rates by paying interest on bank reserves rather than relying on traditional open market remedies, as it exits from its long-term fiscal stimulus programs, Reuters reported today (Tuesday).

Paying interest on reserves is mostly untested and would represent an unexpected twist in the Fed’s response to the financial meltdown.

“In the old days … the Fed controlled the federal funds rate with open market operations,” Antulio Bomfim, a former Fed economist now with Macroeconomic Advisors LLC in Washington told Reuters. “Now, at least in this period when reserves are over-abundant, the way the Fed hopes to raise the federal funds rate will be primarily by raising

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Northern Trust posted a short comment yesterday 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.

Source: Northern Trust - Daily Global Commentary, November

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By Bob Blandeburgo Associate Editor Money Morning

Stimulus measures in Japan helped the world’s second-largest economy grow at its fastest pace in more than two years, but it’s unlikely policymakers will reduce spending despite the nation’s rapidly growing debt.

Gross domestic product (GDP) in Japan grew at 4.8% annual rate in the third quarter, surpassing all the forecasts of 20 economists polled by Bloomberg News. That follows a revised gain of 2.7% in the three months ended June 30, according to Japan’s Cabinet Office. Japan’s economy grew 1.2% on a quarterly basis.

“The turnaround in public investment has definitely contributed to the rebound in GDP, so if they do start to cut it’ll weigh on growth,” Hiromichi Shirakawa, chief Japan economist at Credit Suisse Group AG (NYSE ADR: CS), told Bloomberg.

Stimulus measures around the world helped Japan’s exports grow 6.4%, but as global economies withdraw stimulus measures,

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By Don Miller Associate Editor Money Morning

U.S. retail sales rose unexpectedly in October as vehicle sales rebounded from a deep slump. However, non-auto sales rose less than forecast, suggesting consumers remain cautious as unemployment surges amid a “jobless recovery.”

Sales at the nation’s retail outlets increased 1.4%, the Commerce Department said today (Monday), much better than the 0.9% increase projected by the median estimate of 66 economists in a Bloomberg News survey. But September sales were revised downwards to a 2.3% decrease from the previous estimate of a 1.5% decline.

Aside from automobiles, other sales rose just 0.2%. That increase marked the third month in a row that sales rose, but failed to meet the 0.4% climb economists had predicted.

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TODAY: Medvedev's state of the nation address warns opposition against using democracy to rock the boat; talks up modernization. Media unconvinced President can match word with deed. Topol-M problem for START replacement talks;  Litvinenko suspect Lugovoi willing to speak to London prosecutors?; is Russia really cracking down on nationalists; Putin world's third most powerful according to ForbesIn President Medvedev's second state-of-the-nation address, highlights of which can be found here, he warned opposition politicians not to use democracy as a way to 'destabilize the state and split society'. The fact that the speech emphasized long-term goals, related to cutting time zones, technology and industrial modernization, heralds a call for re-election argues one analyst, quoted in the Moscow ...

The post below is republished courtesy of Trader Mark, writer of the Fund My Mutual Fund blog (hat tip: Damien Hoffman of Wall St Cheat Sheet).

Societe Generale’s Albert Edwards is generally considered an uber bear, although there were times in the past year he has tactically increased exposure to equities to take advantage of oversold conditions. Now is not one of those times. In fact, Edwards chimes in with many similar thoughts we’ve posted on the fundamentals … but sticks his neck out calling for new lows in 2010.

While the belief from this blog writer is this will all end badly, knowing when and how will be the ultimate question. Without the massive intervention by central banks and governments we’d have a different landscape; and without knowing to what lengths these people will continue to go to, it’s much more difficult to predict the intermediate

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This post provides links to a number of interesting articles I have read over the past few days that you may also enjoy.

• Economist.com: Cross my palm with euros? November 11, 2009. The dollar’s days as the world’s reserve currency are far from over.

• Randall Forsyth (Barron’s): Good and bad news in China’s currency shift, November 12, 2009. Allowing the remnimbi to rise may cut global imbalances but also tighten tap of liquidity.

• John Plender (Financial Times): Decline but no fall, November 11, 2009. As US president Barack Obama begins a tour of Asian capitals, the standard assumption in the west is that his meetings will be with leaders of nations that rank as America’s junior partners. Yet the reality is more complex. Amid the rubble of the financial crisis, the US position as singular superpower and

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This post provides links to a number of interesting articles I have read over the past few days that you may also enjoy.

• Daniel Gross (Newsweek): The greatest trade ever, November 10, 2009. How hedge fund manager John Paulson bet against the real estate bubble and made $15 billion in a single year.

• abc News: SocGen’s top analyst sees market lows next year, November 9, 2009. Albert Edwards, a top analyst with French bank Societe Generale, expects global markets to hit a new low in 2010, adding that he would not be surprised if the global economy enters another recession next year. Edwards, one of the leading equities bears and a long-term critic of the policies of Western central banks, is skeptical of popular opinion that extreme policy response will safeguard the West against a repeat of Japan’s lost decade of the 1990’s.

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