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Friday, July 6

6th Jul - Best of The Week

The picks from my ending week's posts.

EU Summit SpecialMoreLiver’s

The Four Paths Forward For The Euro AreaZH
Goldman Sachs: 1) The Cultural Revolution 2) The Long March 3) The Great Leap Forward 4) Disintegration.

Europe’s Great IllusionKrugman / NYT
The stakes are very high, and
Europe’s leaders are, by and large, neither evil nor stupid. But the same could be said, believe it or not, about Europe’s leaders in 1914. We can only hope that this time is different.

Europe on the rackThe Economist
The longer the euro area’s debt crisis drags on, the more it resembles an instrument of economic torture. Like the medieval rack, every turn of the crisis tears Europe further apart.

Devalue the Euro?Bruce Krasting
If I'm right, after a few weeks things turn south again in the capital markets.Then what?... Devalue the Euro by 20++%.... Is this feasible? I say it is. It has happened twice before in history. In 1985 the world got the Plaza Accord that devalued the dollar and in 1987 we got the Louvre Accord that revalued the dollar. In both cases, the global central banks (CBs) and acted together.

Why Germany's TARGET2-Based Eurozone Preservation Mechanism Is Merely A Ticking Inflationary TimebombZH
Goldman’s views

Germany's growing exposureSober Look
if you were Jens Weidmann or the the Bundestag or Angela Merkel or the German public for that matter, and you were looking at the chart below of Bundesbank's assets, what would you think?

The Spanish Bank Bailout: Separating the Wheat from the ChaffTF Market Advisors

Euro Crisis: 366 Days Later PragCap
A look back at the “Greece is saved”, LTRO1, LTRO2 rallies: It is important to understand that the “agreement” reached last week was nothing more than political posturing and is, as usual, long on hope and short on details.

The Failure Of The FirewallMark Grant / ZH
Europe has placed its full concentration on the totally wrong aspect of the problem which has been to ward off the evil spirits of the bond vigilantes instead of on fixing the financial problems of the nations and so the problems continue and worsen…We also learned over the weekend that various takes on the Summit were not all the same as Ms. Merkel’s version differed significantly from the Spanish tale.

The Terrible Cost of Inaction in Europe PIIE
The European leaders this time have offered a more hopeful approach than in the past in both form and substance, but Europe could still be headed in the wrong direction unless the ECB builds an appropriate bridge on the structure of the decisions taken at the June summit and the political process implements those decisions comprehensively and expeditiously.

Europe’s Winners and LosersProject Syndicate
Joschka Fischer: Both sides will have to decide whether or not they want Europe – that is, full economic and political integration. Economically, they must choose either joint liability and a transfer union or monetary re-nationalization. Politically, the choice is whether to empower a common government and parliament or return to full sovereignty.

Learning by imagining (nightmare Eurexit scenarios)alphaville / FT

Ten Observations on EuropeMarc to Market

The Crises of SummerProject Syndicate
What has produced the populist backlash is the spectacle of political authorities devising technically complicated solutions that lack credibility. Simply put, the experts need to stop treating Europe’s citizens as if they were stupid.

Germany Backtracks On Last Week's SummitZH
Wonder why PIIGS yields are moving up again?

ECB's balance sheet hits €3.1 trillion; nearly half the assets are loans to banks Sober Look
Nice “before and after” charts

Emerging Markets Quantitative ReviewLong Room / FT (pdf)
Morgan Stanley’s 106-page giant (free registration required).

Safe AssetsLong Room / FT (pdf)
Goldman Sachs research note (free registration required).

The Ultimate History-Of-Markets Chartbook ZH
Bank of
America / Merril Lynch’s 102-page giant (full pdf here)

Is The Swiss National Bank Faking It?ZH
JPM: What we didn’t know is that approximately half of this intervention was in fact sterilised. This is highly significant and undermines the credibility of the SNB’s claim that it is willing to do whatever it takes to hold EUR/CHF 1.20. For the floor to be credible the SNB needs to surrender control over the Swiss monetary based, i.e. it has to be willing to deliver both unlimited and unsterilised FX intervention. The intervention in May was certainly unlimited; it most definitely was not unsterilised.

Google Wants to Make You a Power UserTech News
Google is offering you a chance to step up your search game. The company said it will provide a series of six courses in July to turn the average Google user into a power user. The free 50-minute classes can be taken during a two-week window beginning July 10.

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