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Sunday, March 24

24th Mar - Weekender: Best of the Week

Last week's 'Best of' here.

Previously on MoreLiver’s:

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IMF tells EU to act boldly and fix the banksReuters
The EU must be bold in putting its banks on a stabler footing, starting with a tougher health check for lenders this year, the IMF said.

Special: Bailout of CyprusMoreLiver's Daily

This House Has No Confidence In Olli Rehn, Nor Anyone ElseA Fistful of Euros
But isn’t this a bit, you know, 2008? If there was any point to the policy of the European powers-that-be, surely it was that this stuff was meant to be over? Instead, we are landed with a sort of permanent state of emergency. Why isn’t anybody sorry? Why isn’t anybody responsible?

The time inconsistency of austerity politicsThe Current Moment
A policy framework dedicated towards the curtailment of expansionary policies has given us a European continent saddled with debt and a global debt crisis. There is something more to this than the theory of the time inconsistency of optimal policy rules.

Europes Lost-and-Found DecadeProject Syndicate
It is unlikely that Europes economy will follow the pattern of emerging-market crises and rise, phoenix-like, from the ashes. But, for better or worse, the fact that the most severe political and social turbulence is yet to come at least means that Europe will be unable to afford the dithering that produced Japans lost decade.

Macro Digest: Europe’s PMIs not bad enough – TradingFloor
Juhani Huopainen: The European March PMI numbers were a lot weaker than expected. But as the ECB is not allowed to do anything, the EURUSD shrugged off the news. Apparently, a deflation threat and recession are OK for the EU.

Wealthy Germany – and even more wealthy Italy and Spain – Nordea
Private households in Spain and Italy are much more wealthy than German households. This is one of the results of a study that the Bundesbank published yesterday

ECB bond-buying may be moving from deterrence to stand-byReuters
One of the biggest questions facing financial markets is the will-they or won't-they hovering over the European Central Bank's bond-buy program.

Impact Imminent?Bruce Krasting
What happens if Cyprus does a “drop out” of the EU? That result immediately makes a lie of Mario Draghi’s words that the Euro was Uber-Ales. This is precisely what Super Mario said “would never happen”… Given that there is zero chance that Italy and Spain will do the necessary begging, the value of the promised Draghi “put” is now also zero.

A very clear explanation of why the euro zone keeps explodingWonkblog / WP
Lachman: But they don’t have their own central banks to pump up the money supply and offset austerity and nor can they depreciate currencies. The reason you’re seeing these crises recurring is they’re trying a recipe that can’t work. And so the economies just keep weakening.

The Future of the Euro: Lessons from HistoryBrad DeLong

Is The Euro a Currency or a Prison?WSJ
Wearing the disguise of austerity, the single currency has emerged as the gatekeeper of what is fast becoming a debtors' prison.

EMU = not Enough Monetary UnionMarc to Market
It has been widely recognized that a critical challenge Europe faces is a monetary union without fiscal union. Yet the Cyprus crisis demonstrates that monetary union is not complete. 

Too big to guaranteeButtonwood / The Economist
The difficulties involved in solving the Cyprus crisis are all the greater because the banks are much bigger than the domestic economy. But Dhaval Joshi of BCA Research points out that this is true for the euro zone as a whole

Fed to signal no let-up in easing yetNordea (pdf)
We expect the Fed’s policy and forward guidance to remain unchanged after next week’s two-day FOMC meeting, which concludes on Wednesday (summary).

The Waning Effect of QE?PragCap

The Fed’s exit will be gradual and difficultGavyn Davies / FT

FOMC preview: QE programme in focusDanske Bank (pdf)

A turning pointFree exchange / The Economist
Tomorrow, the Fed will release new economic projections, and Ben Bernanke will answer questions on Fed policy at an afternoon press conference. I suspect that the thrust of many of those questions will be: when are you going to start tightening?

Is the Fed's crystal ball rose-colored?Wonkblog / WP
On Wednesday afternoon, the leaders of the central bank will release their forecasts for  levels of economic growth, unemployment and inflation they expect to see over the coming three years.

Macro Digest: Fed did nothing, as expectedTradingFloor
Juhani Huopainen: The Fed announced no changes to its monetary policy. Debate on the eventual QE-exit is intensifying, and the Fed will soon have to come up with its own idea.

Japan: Front-Runner Of Outright MonetizationZH
Ryutaro Kono of BNP Paribas: Japan: The challenges facing a Kuroda-led BoJ

Visualizing Bob Farrell's 10 Investing RulesStreet Talk Live

Investing/Trading Rules, Aphorisms & Books (Spring 2013)The Big Picture

Conditional Risk Premia in Currency Markets and Other Asset ClassesSSRN
Is downside risk the critical driver of investor asset valuation? In the January 2013 version of their paper entitled “Conditional Risk Premia in Currency Markets and Other Asset Classes”, Martin Lettau, Matteo Maggiori and Michael Weber explore the ability of a simple downside risk capital asset pricing model (DR-CAPM) to explain and predict asset returns

Weekend Reading for Financial AdvisersCFA Institute
Behavioral Finance, Twitter, and Memory

The end of an era?Free exchange / The Economist
Capital flow restrictions will be very useful to countries interested in using a bit of inflation to chip away at high debt levels. And that includes just about everyone.

New financial forecastsNordea (pdf)
Here are the usual financial forecast slides with our new financial forecasts published this this morning in Economic Outlook (summary).

Vieraskynä "tyhmyri": Mistä eurokriisi johtuuMoreLiver's Daily