Here are
the “best” article links from the past week.
Previously on MoreLiver’s:
EUROPE
George Soros: Why Germany Should Lead or Leave – Project
Syndicate
If Europe is to escape its crisis, its leaders must awaken Germany to the misconceptions that are guiding its policies. At this point,
that will not happen unless they persuade Germany to make a choice: become a benevolent hegemon or exit the eurozone.
The Tragedy of the European
Union and How to Resolve It – The
New York Review of Books
George
Soros with a very long piece: In short,
the current situation is like a nightmare that can be escaped only by waking up
Germany and making it aware of the misconceptions that are currently guiding
its policies. We can hope Germany, when put to the choice, will choose to exercise benevolent leadership
rather than to suffer the losses connected with leaving the euro.
Things That Make You Go Hmmm – Grant
Williams / ZH
The latest
edition of the newsletter comments the ECB: Draghi
has temporarily released the pressure on Europe’s peripherals, but he has had to go
beyond to the very edge of his mandate. What happens next is open to debate but
the Eurocrats are bound to find a way to ensure we have no more than a few days
of relative calm ahead of us.
Now it’s back to Europe’s
politicians – Macrobusiness
As I have continued to talk about over this
year, without a massive change in direction, the economic outcomes of Europe have already been decided. Attempts
at supra-Eurozone fiscal consolidation all but guarantee a fall in economic
output for the EZ, and the recession has really only just begun. In that regard
it is the politics that will become increasingly important over the next 12 months
as the economic fallout opens new fractures in the political systems of
participating nations.
Pierre Moscovici's speech at
Bruegel Annual Meeting – bruegel
“…where the eurozone stands at the moment, and
what we think should be the path forward.”
Saving the euro: Tick tock – The Economist
Even if the ECB successfully intervenes, the
euro zone’s politicians must ultimately determine the euro’s fate. Although
work on a banking union has begun, they are many months away from actually
setting one up. Leaders increasingly recognise the dangers of excessive
austerity, but they still routinely demand harsh budgets as a token of merit.
The debate about mutualising some government debt, which this newspaper thinks
essential to restoring confidence, has barely begun. The vague German demand to
shift political power to federal Brussels has hardly been
broached in France.
Research: Finnish economy -
falling star – Danske
Bank (pdf)
We have revised down our outlook for Finland to take into account the worse-than-expected 2012 Q2 figures: GDP is now forecast to remain flat in
2012. According to the preliminary figures GDP contracted by 1.1% q/q in the
second quarter. Given weak leading indicators and statistic flow, Finland has probably fallen into the recession as we expected. For 2013 we
expect sluggish growth of 1.0%, because the year will get a challenging start
and the weak euro area outlook continues to hurt exports.
Spanish Fly In The Ointment – Macro
Man
German court announcement was pretty much as
expected. A green light, but with what we have come to expect with all Euro
capitulations, a conditionality sweetener to placate the hardliners…A lot has
been made of the ECB's bond buying proposal, and for good reason. The question
of just how much time it buys Europe, however, is a bit more nuanced.
The Evolving Euro – EconoMonitor
it is clear that Eurozone 2.0 will not be
launched for several more years. The president of the European Commission in his
recent State of the Union address admitted that completion of the new design
would require changes in the EU treaties.
Eurozone building blocks are
falling into place – Gavyn
Davies / FT
The ESM and the fiscal compact can now be
safely launched, and any immediate obstacle to Mario Draghi’s bond buying plan
at the ECB has disappeared…there may be limits to the willingness of the German
political system to make the cross-border transfers which are inherent in the
ESM/ECB support operations, especially if the troubled economies, following the
example of Greece, fail to stick to the necessary policy conditions
Goldman On Spain's Tension-Inducing Arrogance – ZH
The opposition seen in Germany in response to Mr Draghi’s preparedness to buy sovereign debt implies
that current posturing in Spain will not wear well
with the politics of signing a Memorandum of Understanding in Germany. The more the Spanish administration indulges domestic political
interests and is perceived to be taking undue advantage of external support,
the more explicit conditionality is likely to be demanded.
Mr. Draghi, Mr. Arnault, and Europe’s
Gordian Knot – EconoMonitor
This Gordian knot is, in turn, the consequence of
two forces at the heart of the EU’s functioning—or rather, its epic
dysfunctions: a creditor protection dogma and a fiscal black hole.
Do they they think it’s all
over? – MacroScope
/ Reuters
Good short
list of open issues (Italian elections, Spain, Bundesbank, recession, austerity, Greece)
Meet Europe's
leader of last resort – Business
Spectator
Just as Draghi makes his power grab sound like monetary
prudence, Monti dresses his authoritarian demands in the colourful language of
European integration and cooperation. But it cannot disguise the fact that what
he is actually demanding is a departure from liberal democracy. In the European
Union, criticism is denounced as populism, recklessness is called prudence, and
disunion becomes integration. It is hard not to be reminded of Orwell’s
Ministry of Truth when seeing the façade of the Berlaymont building.
IMF officials say Greece will need a third bailout – ZH
The euro’s demise may be the
final chapter of the ERM debacle – The
Telegraph
The drama of 1992 showed why Germany cannot lead Europe out of a monetary crisis
The euro zone’s leaders have
turned a corner. Where to, is not yet clear – The Economist
In the end, the euro’s survival rests on the
political support for greater economic and financial union. That will be the
real game-changer.
Autumn renewal? – The Economist
Having survived a difficult month, the euro
zone is grappling with its taboos
EUROPE: GERMAN COURT RULING
German court approves new
plan to save Europe. But is it a good plan? – Wonkblog
/ WP
So, instead, Europe’s leaders have devised a compromise
plan that’s supposed to quell the immediate financial panic, bring down leaping
bond yields, and at the same time placate German voters who are tired of
bailing out their neighbors.
Burying a banking licence – alphaville
/ FT
the court adds more legal flesh to the argument
against the ESM tapping the ECB — interestingly through delving into the ESM
treaty text itself. Most interestingly of all, it does so in a way that
suggests the treaty really is badly drafted ambiguous to interpet on key points.
What will the German Constitutional Court ruling mean for the eurozone? – Open Europe
This decision merely referred to the question of
whether to grant a temporary injunction against the ESM. The full ruling on the
complaints is expected in early 2013. However, since the law can now be
finalised, and as an international treaty may be difficult to reverse, many
expect the final ruling to be along the same lines.
German
Constitutional Court tightens the noose yet further – The
Telegraph
"An acquisition of government bonds on the
secondary market by the European Central Bank aiming at financing the Members’
budgets independently of the capital markets is prohibited as well, as it would
circumvent the prohibition of monetary financing."
EUROPE: BANKING UNION
The promise and pitfalls of
the euro zone’s plan for a banking union – The Economist
The euro zone was woefully late in trying to
stabilise its banks and ensure that taxpayers do not have to pay when they
fail. Moreover, it is unlikely ever to create a regulatory system like
America’s which allows the FDIC, for instance, to wind up a bank in a weekend.
Banks in Europe tend to be larger as a share of national GDP than those in America, and European
companies rely more on banks than American ones. More important, in a
corporatist political culture, small banks are often tools of political
patronage and big ones are treated as national champions.
Here's the full proposal for
an EU banking union (leaked)
The Commission's highly anticipated
proposal for an EU Banking Union, due to be released on 12 September, has
leaked (courtesy of Italian daily Il sore 24 ore). The
full document can be read here.
Banking Union Part II – now for
the safeguards – Open
Europe
Let’s not be afraid of…
banking union – alphaville
/ FT
JPMorgan’s
Alex White has taken a stab at some of the current problems:
Euro-zone banking union – The Economist
Plans for common supervision could easily turn
messy
EUROPE: ECB
Spain and Italy mustn’t blow ECB plan – Hugo
Dixon / Reuters
For now, Draghi can withstand the criticism, as
long as Angela Merkel keeps backing him. But if Rajoy and Monti don’t move
fast, the ECB’s magic will wear off. And if its medicine then fails, it will be
hard to conjure up the political will for an even more powerful concoction.
ECB death pact good for risk (6-Sep) – James
Saft / Reuters
Becoming a lender of last resort then
ultimately means that the ECB enters into a death pact, a sort of mutually
assured destruction, with the states it rescues, as each can bring the other
down. That may make Bundesbank fears of inflation and debasement correct, even
if it doesn’t make their preferred course of policy wise. For investors it
comes to the same thing; for now be more comfortable with a bit more risk but
be prepared for that to change. Your main insurer is committed and owns a
printing press, but death pacts can and do end badly.
Volatility and the OMT – alphaville
/ FT
Will the
ECB support price levels from the LTRO? Also, Draghi said volatility is one
factor they watch
BofAML: The ECB OMT: End game or
(some) more trouble?
– ZH
The ECB has offered a seatbelt to a driver with
a bad driving record, which will only work if the driver agrees to a strict
monitoring of his driving. So, will the driver accept the offer in the first
place? Will he change his behaviour afterwards? And if not in the latter case,
is the threat of removing the seatbelt credible?
The OMT, and the plumbing – alphaville
/ FT
Charts on a certain broken transmission
mechanism are popping up everywhere.
USA
Weekly Chartopia – ZH
Good charts
from a recent Goldman Sachs note
Debt Be Not Proud – John Mauldin /
The Big Picture
How Down Can Be Up If You Create the Rules *
The Fed to the Rescue? * The Correlation Between Government Size and Growth *
Debt Be Not Proud * Debt Overhangs: Past and Present * Should the Fed Give Us
QE3?
Is US economic growth over? – Robert J. Gordon / voxeu.org
Global growth is slowing – especially in
advanced-technology economies. This column argues that regardless of cyclical trends,
long term economic growth may grind to a halt. Two and a half centuries of
rising per-capita incomes could well turn out to be a unique episode in human
history.
Moody’s update on US rating, threatens downgrade – alphaville
/ FT
ASIA
UBS Asia: is the miracle over – ZH
After two decades of unparalleled economic
success, we believe China now needs a reform
programme on a scale similar to that adopted 30 years ago. Without it, a
heavily investment-centric and credit-intensive economic model could soon
become unstable, and later stall in a middle income trap. (full 29-page document download)
OTHER
The fifth wave – Steen’s
Chronicle / Saxo Bank
Extend-and-Pretend continues – now in the phase
of Maximum Intervention but it’s the wrong medicine at the wrong time…We are in
the fifth wave of all major macro benchmarks: the stock market (high), yields
(low), economics (low), intervention (high), hope (high) and politics (low).
This will lead into an ABC correction phase for valuation.
Podcast: In the
Balance - Central bankers: too powerful or too weak? (25min) – BBC
(mp3)
As the ECB brings in a new scheme to save the
euro, the programme asks whether central banks have been over- reaching
themselves. Have they been poking their noses into stuff that should be left to
elected politicians? Plus central bankers' impenetrable jargon: In the
Balance's resident comedian Colm O'Regan reckons parents could deploy that kind
of language next time the kids ask for more pocket money. Discussing these
issues with Lesley Curwen - naturally in the clearest way possible - are
Randall Kroszner, former member of the Board of Governors of the Federal Reserve,
who was chair of its Committee on Supervision and Regulation of Banking
Institutions during the global financial crisis; Professor David Blanchflower,
formerly a member of the Bank of England's interest rate-setting Monetary
Policy Committee and economist Gabriel Stein, from the Official Monetary and
Financial Institutions Forum.
UBS: PMIs and Global Equities – ZH
Given the recent rally, in addition to
underlying macro weakness, policy action - and effective action at that – has
become increasingly important for investors. Without it this recent rally could
end up looking more like a false start than a head start.
Introduction to Computational
Finance and Financial Econometrics – Coursera
Free online
course from University of Washington.
Fiddling at the Fire – Nouriel
Roubini / Project Syndicate
Ineffective governments with weak leadership
are at the root of the problem. In democracies, repeated elections lead to
short-term policy choices. In autocracies like China and Russia, leaders resist the
radical reforms that would reduce the power of entrenched lobbies and
interests, thereby fueling social unrest as resentment against corruption and
rent-seeking boils over into protest.
OFF-TOPIC
The Great Ideas of the Social
Sciences – Farnam
Street
9/11 Articles, past and
present (2011) – MoreLiver’s
Daily
IN FINNISH
Kolme syytä vastahankaan,
pääjohtaja Liikanen – Jan
Hurri / TalSa
EKP ryhtyy uusiin kriisivaltioiden
tukitoimiin. On kyseenalaista, toimiiko EKP perussääntönsä mukaan vai sitä
rikkoen. Saksan keskuspankin johtajat ovat vastustaneet mielestään kiellettyjä
tukitoimia jopa eroamalla tehtävistään. Suomen Pankilta kriisitoimilla on
hiljainen hyväksyntä – vaikka pääjohtaja Liikasellakin olisi vastahankaan
ainakin kolme hyvää syytä.
EKP:n hyvä ja huono versio – Krasting
/ Huopainen / US Puheenvuoro
Omasta mielestäni
Draghi on asettanut EU:n ja siten koko maailman ison kuilun eteen. Mikään hänen
suunnitelmassaan ei muuta Espanjan talouden tilaa. Lisäsäästötoimet eivät
korjaa Espanjaa vaan ne vain pahentavat sen tilaa.
Lunastus – Henri
Myllyniemi / US Puheenvuoro
EKP lähti uhkapeliin
täydellä bluffilla. On sinällään se ja sama ketä tässä loppujen lopuksi
bluffataan, mutta asia on aiheellista ottaa esille jo pelkästään siksikin, että
Suomi on mahdollisten hämäämisyritysten kärsijänä.
Tyhjensikö EKP pöydän? – Raha
ja Talous
Vaikka EKP ei vielä
uusilla päätöksillään onnistunut tyhjentämään pelipöytää, se osoitti pystyvänsä
halutessaan sekä rauhoittamaan markkinat että lopettamaan eurovaltioiden
rahoituskriisin. Viimeinen askel eli rahoitusavun ehdollisuuden poistaminen jäi
kuitenkin ottamatta, minkä seurauksena analyyseja Euroopan talouskriisistä
julkaistaan tässä blogissa myös jatkossa.
Euro on ja pysyy - ja Suomi maksaa – TE
Esko Seppäsen tuoreen kirjan arviointi – vilkaise myös tuore haastattelu Ylellä.
Pysyväisluontoinen taantuma – Hannu
Visti
Björn Wahlroos: Piikki kiinni – Talouselämä
”Vähän kärjistäen
voisi kysyä, että haluatteko todella, että OP-Pohjola takaa koko euroalueen
pankkijärjestelmän?” Wahlroos provosoi.