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Monday, April 22

22nd Apr - US Close

While the weekend's meetings hardly surprised and the statements were pretty much in line of what was expected, two things stand out: Reinhart & Rogoff's debt/GDP 90% being a watershed level was debunked and the important talking heads (Diesel-Boom) stated that austerity has its limits and will be eased for e.g. Portugal. Secondly, the Germans were concerned about the easy monetary policy.. It looks like the leaders are getting the picture finally – the monetary policy is too easy for Germany and inflating housing bubbles in most core countries, while too tight for the periphery. Now it is either up to fragmented monetary policy (ECB next week?) or either more fiscal transfers or national budget overdrafts to sort out the mess.

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Europe in Depression?Project Syndicate
Today, as southern European countries experience high levels of unemployment, huge savings and potential demand for consumer and capital goods remain locked up in northern Europe. It is time for northern European countries to use their huge excess savings to support growth.

So what’s the plan, Mr Rehn?El País / Presseurop
Discipline and budget cuts: The cure prescribed for the Eurozone no longer has unanimous support. Unfortunately, voters can not settle this debate as it is between unelected officials, foremost among them, is the Commissioner Rehn.

Barroso: Europe near austerity limitFT

What is the net of good and bad news from Brussels and Washington?Bruegel
Two important documents have been issued in the last few days: the In-depth reviews following the so called AMR (Alert Mechanism Report) from the European Commission and the World Economic Outlook from the IMF.

Poland and the euro: closerbeyondbrics / FT
In or out? That’s the question as Poland’s leaders send mixed messages about just how aggressively the country plans to move towards adopting the euro.

Merkel says euro members must be prepared to cede sovereignty Reuters
Merkel said on Monday that euro zone members must be prepared to cede control over certain policy domains to European institutions if the bloc is truly to overcome its debt crisis and win back foreign investors. (ZeroHedge comments)

No German 'hegemony' in Europe, Merkel sayseuobserver
Merkel has said there is no German hegemony in Europe, but insisted that euro countries cede more sovereignty to overcome the crisis.

Germany’s new anti-euro party, Alternative für DeutschlandEuropp / LSE
While the broad nature of its support base might prove problematic in the long term, it nevertheless has the potential to be a ‘game changer’ in German and European politics.

Greece will probably pull throughHugo Dixon / Reuters

Fact Book GreeceDanske Bank (pdf)

Everything you think you know about the Fed is wrongBehavioral Macro

Earnings So Far: Just Three ChartsZH

Finding the best four-year market forecasterMarketWatch
A comprehensive analysis of 1,700 stocks tells us abouth the marketGreenbackd

Chicago Fed: “Slower activity in March” – Calculated Risk , dshort , Capital Spectator , PragCap
Existing Home Sales in March down, prices rise – Calculated Risk , Calculated Risk II , Reuters , BB
US Macro Data Plunges To 5-Month Low – ZH

China’s post-modern macro data (or, when Q1 is not Q1)alphaville / FT
It turns out that China's official statisticians might not have adjusted for 2012 being a leap year in the Q1 accounts. Plus, there have been big sampling changes that render the numbers even more subjective than we thought...

Jim Chanos' Presentation on China From The Wine Country ConferenceMarket Folly
Chanos has held a negative view on China for a while now, largely focused on the property market.  His presentation this time of course focuses on that as well but also highlights rising wages and a wealth gap.

Mark Yusko's Presentation on Japan From The Grant's ConferenceMarket Folly
The current rally in Japanese equities is just getting started and that there's a lot of room to run… Yusko points out that there will be winners and losers in Japan and offers some ideas.

FX Comment: in Europe we trustNordea
Growth trumps everything. European PMIs this week is a "fingers crossed". More upside for EURUSD, GBPUSD, USDJPY.

Fiscal Sustainability: A 21st Century Guide for the PerplexedIMF
This paper critically reviews recent work regarding the sustainability of public debt. It argues that Debt Sustainability Analyses (DSAs) should be more than mere mechanical simulation exercises. Instead, a DSA should be linked to some objective regarding the distribution of fiscal burdens and distortions over time (in the tradition of Barro’s 1979 tax smoothing objective). The paper discusses objective functions that yield simple and transparent fiscal policy rules.

Currency peace: G20 gives BOJ a pass for deflation fightMacroScope / Reuters

Breaking bad inflation expectationsalphaville / FT
QE/government intervention is announced, people interpret this as inflationary, risk-on mentality ensues, a good opportunity to lock-in yield is provided for anyone who recognises the yield curve is mispriced — in the sense it is pricing in too much inflation/higher interest rates — the expectations turn out to have been misplaced, the curve corrects, confidence is lost until a new round of QE or government intervention is announced. And so on.

Graphic of the day: Long-term sovereign debt ratingsThomson Reuters
Fitch stripped Britain of its top-grade AAA rating on Friday, but unlike rival Moody’s – which did the same in February – it gave the new rating a stable outlook. Today’s graphic shows the long-term sovereign debt ratings for Britain, the US, Japan and the rest of the euro zone.

Suomalaiset tyrmäävät EU-talousliiton tiivistämisenYLE
Puolet suomalaisista on sitä mieltä, että heikkojen euromaiden pitäisi antaa romahtaa, vaikka se pahentaisi työttömyyttä myös Suomessa, kertoo TNS Gallupin tuore kyselytutkimus.

Meillä kaikilla lienee jokin käsitys velkavankeudesta, mutta minusta on aika pohtia ainakin yhden blogikirjoituksen verran ilmiötä, jossa velka on symboli jostakin muusta, velkaan, erityisesti julkiseen velkaan on syntynyt erikoinen riippuvuus.

Mikä on talouspolitiikan vaihtoehto?Hannu Visti

Uusklassisen teorian raunioilla: Reinhart ja Rogoffrevalvaatio