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Sunday, June 3

3rd Jun - Weekender: Economics & Research

This week’s selection of readings on the economy and some research papers. Markets- and Off-topic-posts coming up next.

Previously on MoreLiver’s:

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Remarks at the Festival of Economics, Trento ItalyGeorge Soros
Ever since the Crash of 2008 there has been a widespread recognition, both among economists and the general public, that economic theory has failed. But there is no consensus on the causes and the extent of that failure. I believe that the failure is more profound than generally recognized.

What's Really Behind Europe's Decline? It's The Birth Rates, StupidForbes
In particular, southern Europe’s economic disaster is both reflected — and is largely caused by — a demographic decline that, if not soon reversed, all but guarantees the continent’s continued slide.

The Breakeven Point (Wonkish But Terrifying)Krugman / NYT
Overall eurozone inflation must be sufficiently high. That’s a necessary but not sufficient condition for salvation; not sufficient because a banking crisis can still blow the thing apart, but necessary because you can’t resolve the banking crisis unless there’s some plausible path back to sustainable economies.

America's economy: Port in the storm, but for how long?Free exchange / The Economist
America’s economy, oddly enough, has been playing the role of bright spot in the world economy in recent months. The worse the outlook elsewhere, however, the less distinction comes with the part, and the less impressive becomes the American recovery.

Emerging markets: Beware falling masonryFree exchange / The Economist
Attention is focused on troubles in the euro zone, but emerging markets are looking a shaky these days, as well. Shakiest of the bunch is India, which reported a surprisingly poor 5.3% rate of growth for the first quarter.

End This Depression Now!London School of Economics (audio)
Professor Paul Krugman | The Great Recession is more than four years old—and counting. Yet, "Nations rich in resources, talent, and knowledge—all the ingredients for prosperity and a decent standard of living for all—remain in a state of intense pain." In his new book, End This Depression Now! which he will discuss in this event Krugman shows how the failure of regulation to keep pace with an increasingly out-of-control financial system positioned the United States and the world as a whole, for the greatest financial crisis since the 1930s. Decrying the tepid response thus far, he lays out the steps that must be taken to free ourselves and turn around a world economy stagnating in deep recession. His is a powerful message: a strong recovery is only one step away, if our leaders find the intellectual clarity and political will to see it through. (also video player)

The Non Jobs Report and the Myth of De-couplingTF Market Advisors
…currency devaluation risk, even more than solvency risk, is putting the entire Spanish economy in jeopardy, with Italy not too far behind. This has to be addressed immediately…What form will QE3 take? I think after this job report there should be little doubt that we will see more QE.

The global economy is sitting on a volcano. What happens next?Fabius Maximus
Why do people choose to live on a dangerous explosive volcano?  People are too comfortable to move, and it pays to live there. The soil is often rich.  Some volcanoes have rich mineral deposits or tourism. And they probably will get lucky, as large eruptions occur decades or even generations apart.

Accruing better sovereign creditalphaville / FT
In other words, in a crisis of weak balance sheets – does your government know what its balance sheet even looks like?

Why We'll Never Run Out of Oilreason
The notion that world oil production had reached its summit and would soon begin a decline was in great vogue not so long ago.

JPM Cuts Q3 GDP Forecast From 3% To 2% - ZH
with data table

A central-bank failure of epic proportionsFree exchange / The Economist
The ECB's reaction has been stunningly limited. Its benchmark lending rate has stood at 1% for months. Its long-term refinancing operations were a bold step that prevented a financial disaster. It has since stood by, however, as financial conditions have rapidly deteriorated.

Third time unluckyFree exchange / The Economist
The rum employment figure came in below expectations, but it wasn't entirely out of line with recent data points, which have signalled a slowdown in hiring and slower growth in the economy. Moreover, the news is in keeping with a general turn in global economic sentiment, helped along by troubles in emerging markets but driven largely by chaos and recession in the euro zone

Austerity and Debt RealismProject Syndicate
Kenneth Rogoff: Above all, voters and politicians must beware of seductively simple approaches to today’s debt problems.

The Austerity AgendaKrugman / NYT
Even if you have a long-run deficit problem — and who doesn’t? — slashing spending while the economy is deeply depressed is a self-defeating strategy, because it just deepens the depression.

Global PMI SummaryZH
Data table from BoA.

Thousands of models, one story: current account imbalances in the global economyECB (pdf)

Liquidity and credit risk premia in government bond yieldsECB (pdf)

Estimating Inflation Expectations with a Limited Number of Inflation-Indexed BondsIJCB (pdf)

Stress testing German banks against a global cost-of-capital shockBundesbank (pdf)

Does Wagner's law ruin the sustainability of German public finances?Bundesbank (pdf)

Regulation, credit risk transfer with CDS, and bank lendingBundesbank (pdf)

Bank regulation and stability: an examination of the Basel market risk frameworkBundesbank (pdf)

Credit portfolio modelling and its effect on capital requirementsBundesbank (pdf)