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Saturday, January 19

19th Jan - Weekender: Best of the Week

Here are the ending week’s best picks. As usual, I try to select links that provide unique points, or help summarizing the key drivers. Last week’s ‘Best of’ here.

Previously on MoreLiver’s:                  

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The Year Ahead in the Eurozone: Lower Risks, Same ProblemsEconoMonitor
Nouriel Roubini: Underlying all this is the issue of the loss of external competitiveness associated with external current account deficits that private foreign investors are unwilling to finance. Some internal devaluation is ongoing, leading to a reduction in unit labor costs, but that process is recessionary and occurring too slowly. Thus, though financial conditions have improved and tail risks have lessened, the fundamental problems of the euro zone remain.

About that sovereign-bank link we said we’d break…alphaville / FT
So it looks like the EU maybe won’t be breaking the sovereign/bank doom-loop after all!

Euro at 10-Month High Poses Economic Threat, Juncker SaysBB
The euro’s 8 percent gain against the U.S. dollar in the past six months is posing a fresh threat to the European economy just as it shows signs of escaping the debt crisis, said Jean-Claude Juncker, who leads the group of euro-area finance ministers.

Euro calm must not cost price stability: German economy minister Reuters
Measures to combat the euro zone crisis must not come at the cost of price stability, German Economy Minister Philipp Roesler said on Thursday, a day after he urged the ECB to return to its core mandate as soon as possible.

Mario Draghi has saved the rich, now he must save the poorThe Telegraph
Ambrose Evans-Pritchard: The ECB has washed its hands of any further responsibility for the 27m people across the eurozone listed as unemployed or classified as discouraged workers.

ECB to start buying soon?Nordea
After the huge falls seen in Spanish yields, such a request has moved even further away. However, Ireland could soon meet the eligibility criteria for the programme.

The great European bank heist reversalalphaville / FT
LTRO repayment chat is speeding up the closer we get to the fateful day at the end of January when Euro-banks might actually start sending back once cheap cash to the central bank. How much will be repayed, by whom and when are the questions that need to be answered.

We don’t want your moneyNordea
Banks will have the first chance to repay the 3-year money borrowed from the ECB on 30 January. Early repayments are likely to lead to expectations that excess liquidity would fall notably, giving rise to pricing of higher short rates. However, despite the repayments, plenty of excess liquidity will most likely remain, keeping short rates very close to current levels.

UK's Cameron faces tightrope EU speech, shuns exit voteReuters
Prime Minister David Cameron will spell out plans to dilute Britain's membership of the EU, a move that could reshape its role in the world, upset some of the premier's allies and decide his government's fate.

Cameron Speech Excerpts Raise Specter of EU ExitBB
Cameron publishes parts of unlucky EU speecheuobserver

Cyprus Bailout Could Fail in German ParliamentSpiegel
The urgently needed bailout of the Cypriot banking industry is in danger of being vetoed by the German parliament. The opposition Social Democrats say they are leaning towards voting no, according to a media report. With Chancellor Merkel unable to rely on her own majority, that could be bad news for Cyprus and for the euro.

Germany wants Russian contribution to Cyprus bailouteuobserver
No official figures have been put forward yet, with the results of an audit of Cypriot banks' needs by US consultancy Pimco expected at the end of this week. But the figure discussed by EU diplomats is €17 billion, almost as much as the total yearly economic output of the small country (€18bn).

The Coming Cyprus Challenge for the Euro AreaPIIE
First, the clock is ticking as the Cypriot government has announced it only has financing through March 2013. No one, however, should expect a deal much before then. Second, Cyprus’s financial problems derive largely from its oversized banking system at more than 700 percent of GDP… But that is just the start of the problems.

German views on aid for CyprusBruegel
After the Cyprus’s application for EU aid in June 2012, the negotiations on the programme are now getting concrete. The discussion in Germany about possible aid that is estimated between EUR 12 and 17.5 billion for the period 2013-2016 is focusing on the Cypriot financial sector which doesn’t enjoy a good reputation. In the German media, Cyprus and its banks are widely seen –rightly or wrongly - as a tax haven and a money-laundering base.

Will Cyprus be bailed out by gas?alphaville / FT
Debt dynamics from 140% debt/GDP level can look scary but Cyprus is sitting on huge reserves of natural gas and potentially oil reserves too. How much are these worth? Initial gas reserves discovered are likely worth 300% of GDP. This could rise to 2950% GDP.

Cypriot offensive: the leaked money laundering reportThe Brussels Blog / FT
Cypriot officials launching an offensive to convince other eurozone governments that it is no longer a haven for money laundering. The effort has included summoning EU ambassadors in Nicosia to the Cypriot finance ministry, where they were given a 23-slide presentation detailing the country’s anit-money laundering efforts. As is our practice here at the Brussels Blog, we’ve decided to post a copy of the report here.
Greece: IMF Executive Board Completes First and Second Reviews Under Extended Fund Facility Arrangement and Approves €3.24 Billion DisbursementIMF

Portugal: IMF Completes Sixth Review Under an EFF Arrangement, Approves €838.8 Million DisbursementIMF

In Ireland, to OMT or not to OMT? Brussels blog / FT
The Irish website got its hands on the new European Commission report on the Irish bailout, which makes clear on page 44 that Dublin is in discussions with the troika about whether the ECB’s bond-buying programme – known as Outright Monetary Transactions – can be accessed

Secrets of the crisis revealedWonkblog / WP
The Federal Reserve keeps transcripts of its meetings to set monetary policy, and releases them with a five year delay. It does not announce in advance when they will be released, but if the past is a guide, any day now we will be getting full transcripts of the 2007 meetings of the Federal Open Market Committee.

Citi On The Debt Ceiling: "First Complacency, Then Horror" ZH

Who said what, when? An unofficial guide to Fed speak on QE3 MacroScope / Reuters

The Setting Sun – Japan’s Forgotten Debt ProblemsEconoMonitor
Japan has an average debt maturity of 6 years, shorter than Spain, Italy and France. Around 60% of its debt must be refinanced in the next 5 years. This will expose Japan to the discipline of market investors at a vulnerable moment. Once the problems emerge, they will be difficult to contain.

Koo, Posen, and other Abenomics dissentersalphaville / FT
Koo: There is simply no conclusive evidence that ending deflation will end the recession that has caused so much economic pain.

Finding economists’ common groundOpinion / Reuters
Concerned that laymen have come to see all economic proposals as being equally valid, the University of Chicago's business school has led an effort to figure out what economists agree on, where they diverge and how certain they are about their views.

Besides Gold, Economists Don't Agree On MuchBusinessweek

Is economics divided into warring ideological camps?noahpinion

Why do people think economists are charlatans?noahpinion

Inflation versus Price-Level Targeting in PracticeMacroblog / FED

Consider the book valueFree exchange / The Economist
The ratio of a country’s public debt to its annual income is an undeservedly popular indicator. Presumably, we care about this ratio because we want to determine whether today’s policies burden future generations. But the government’s debt is just a collection of income-generating assets owned and serviced by people in the private sector—often the same people. 

Global house pricesThe Economist
Our latest round-up shows that many housing markets are still in the dumps

Bank liquidityThe Economist
Global regulators soften their stance on liquidity

Betrayed by BaselEconomix / NYT
Simon Johnson: Faced with renewed pressure from the international banking lobby, these officials caved in, as they did so many times in the period leading to the crisis of 2007-8. As a result, our financial system took a major step toward becoming more dangerous.

On diminishing capital intensityalphaville / FT
The commonly held belief that companies’ capital investing ratios have been falling, whilst hoarded cash pools have been going up, is inaccurate…In short, capital investment incentives seem to be skewed in many corporate sectors. By which we mean corporates in many cases are being incentivised to invest less, simply to support underlying capital goods prices.

Financial forecasts – New Year is over, but the party is notNordea (pdf)
or read the summary

361 Capital Weekly Research BriefingThe Reformed Broker

Deutsche's Bullish For 2013 Despite These 6 Huge Downside RisksZH
Full 2013 Outlook link included

Global Alpha’s Macro, Rates & FX Strategy: Views for 2013Nordea (pdf)
Summary here

White House Responds To Imperial Death Star PetitionZH

The Placebo PhenomenonThe Harvard Magazine
An ingenious researcher finds the real ingredients of “fake” medicine.

Howard Stern Interviews Quentin Tarantino for 75 MinutesThe Reformed Broker

Pelastammeko seuraavaksi rahanpesijöitä?Jan Hurri / US Puheenvuoro
Kypros on pieni ja pinteessä – ja europäättäjien poliittinen painajainen. Saarivaltio anoi hätärahaa jo viime kesänä mutta ei ole vielä saanut rahaa tai vastausta. Kypros on vaarassa "kaatua" ja jopa ajautua ulos eurosta, mutta "pelastustoimia" viivyttää epäily tukimiljardien päätymisestä rahanpesijöille.

Suomen valtiolla tuplanaaman tukipolitiikkaJan Hurri / TalSa
Suomen valtion tukipolitiikka näyttää ristiriitaiselta. Luottokelvottomien eurovaltioiden tukemiseen on enimmillään luvattu jopa 50 miljardia euroa – jotta työpaikat ja eläkkeet olisivat turvassa. Turun telakka ei saanut tuhannesosaa tuosta tukimäärästä – ja nyt Turun seutu uhkaa menettää satoja työpaikkoja.

Kun työttömyys nousee tarpeeksi suureksi, niin kyllä ne palkanalennukset menevät lävitsetyhmyri

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