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Saturday, May 11

11th May - Weekender: Best of the Week

The best articles from the ending week. Last week’s ‘best’ here.

Soros versus Sinn: The German QuestionProject Syndicate

Crisis and non-reformFistful of Euros
It’s useful to look at three related but distinct perspectives on why peripheral Europe is in economic crisis. The three perspectives come from the three members of the Troika, so you’d think they’d capture a consensus about why the Troika has to do what it does. And yet.

Exclusive: Internal docs give first look at EU plans to regulate 'shadow banking'Open Europe

Euro area overview Danske Bank (pdf)
Long background reading. Good one for that.

How to kill the European repo market in 10 easy stepsalphaville / FT
Warnings over how the Financial Transaction Tax (FTT) is likely to hurt the repo markets are growing by the day.

When ideology meets economic reality (Part III) Open Europe
Opposition to the FTT grows at the heart of Europe

The dramatic adjustment in eurozone trade imbalances Gavyn Davies / FT
At the present rate of progress, it will take at least 5 more years for the competitiveness gap with Germany to be entirely closed for several economies. In the meantime, extraordinarily high rates of unemployment are likely to persist in the south, and with that will come a continuing risk that voters will revolt against the recessions which they are experiencing.

The euro crisis has turned into a fatal disasterTradingFloor
Lars Seier Christensen's keynote speech at #FXDebates event in London.

Why it Makes Sense to Exit the Euro Zone in Times of Balance Sheet RecessionsSNBCHF

Spring 2013 forecastEuropean Commission
The EU economy – slowly recovering from a protracted recession

Threat to the eurozone is as strong as everThe Telegraph
The eurozone economy has contracted every single quarter since the end of 2011. During the first three months of 2013, the region's GDP shrank by a punishing 0.6pc, having fallen at a similar pace the quarter before.

The economic winter continuesFree exchange / The Economist
The outlook has darkened in the northern core economies of the single-currency club as well as in the southern periphery.

Free exchange: Broken transmissionThe Economist
ECB has lost control of interest rates in periphery

Europe’s credit crunch: Mend the money machineThe Economist
Small businesses’ troubles in periphery are the next step in crisis

What the Danish negative rate experience tells usalphaville / FT
A deposit rate cut will likely drain liquidity from the Euro area banking system and accelerate the early repayment of LTRO funds. Negative interest rates on deposits incentivize banks to “get rid” of their excess deposits rather than suffer an erosion of capital.

Monthly Bulletin, May 2013ECB (pdf)

Fed’s Fisher Would Taper MBS Purchases FirstWSJ
Should the Fed opt to taper its bond buying program, it would be best to start with mortgage-backed securities, the head of the Dallas Federal Reserve bank said Wednesday.

Fed's credibility tested as inflation drifts below targetReuters
With the inflation rate about half of the Federal Reserve's 2.0 percent target, the central bank is facing a major test and some experts wonder whether it will eventually need to ramp up its already aggressive bond buying program.

Bernanke, Blower of Bubbles?Krugman / NYT
The case for significant bubbles in stocks or, especially, bonds is weak. And that conclusion matters for policy as well as investment.

Can And Should The Fed Battle Bubbles?EconoSpeak
Probably not very much, even though critics have blamed expansionary monetary policy in the past for exacerbating both the bubble of the late 1990s and the more recent and more destructive housing bubble whose collapse (and related derivatives markets) precipitated the Great Recession. 

Monitor: Japanese investor flowsDanske Bank (pdf)

Japanese Investors Head Abroad at LastWSJ

Great Graphic: Base Money and Money SupplyMarc to Market
The US and Europe have diverged.  The US acted earlier and more aggressively to recapitalize the banks than Europe, for various and obvious reasons.     Europe is also trying to address the too-big-to-fail problem, while the US has been moving slower and pursuing a different strategy.

Current account imbalances since the crisisalphaville / FT
from a recent Barclays report on global trade.

Preventing The Next Catastrophe: Where Do We Stand?iMFdirect
The financial sector as a continued source of shocks. The question, then, is what to do.

Tarullo’s speech on capital and regulationalphaville / FT
Fed governor Dan Tarullo’s speech Friday on bank capital and regulation could well invigorate the same amount of public discussion as Jeremy Stein’s speech on the role of monetary policy and asset bubbles did.

Blanchard on Fiscal PolicyMainly Macro
What we need is a rule that obliges governments to switch from consolidation to stimulus at or near the ZLB. Otherwise, the next time a large crisis hits (and Romer plausibly suggests that could be sooner rather than later), we will have to go through all of this stuff once again.

Uskoo ken tahtoo: virallisesti Suomi hyötyy kriisistäJan Hurri / TalSa
Suomen julkinen velka paisuu kaksinkertaiseksi ja budjettitalous kyntää uutta alijäämää minkä ehtii. Vienti tökkii ja vaihtotasekin vuotaa. Talous takkuaa ja työttömien suomalaisten määrä kasvaa kymmenien tuhansien vuosivauhtia. Mutta väliäkös vitsauksista – virallisesti "Suomi on hyötynyt kriisistä valtavasti".

Aktian pääekonomistin talouskatsausAktia (pdf)
Timo Tyrväisen tuorein Teesit ja tulkinnat

Mitäs sitten tehtäisiin?Hannu Visti
Euroopassa on ihmetelty taas viime aikoina äärioikeiston äänen kuulumista, on sitten kyse terrorismista ja muusta rikollisuudesta tai sallitusta retoriikasta. Sen kummemmin ottamatta tähän kantaa, huomaamme, että jälleen kerran löytyy seasta näennäisintelligentsiaa, joka on oitis kieltämässä vääriä mielipiteitä, ei ainoastaan vastustamassa niitä.

Pääkirjoitus: EMU-puskurien apu tarpeenIltalehti
Suomen on aika tehdä itse kaikki voitava eurokriisin vaimentamiseksi

Eurooppa-päivänä ei juhlita riehakkaasti, koska EU:lta puuttuu suuntaTalSa
Eurooppa-päivää vietettiin eilen Suomessa, tänään muualla EU:ssa. Henkseleiden paukutteluun ei kuitenkaan ole aihetta, koska EU:lta puuttuu suunta. Tästä kertovat eurokriisin ratkaisuyritykset ja asiantuntijoiden ristiriitaiset tulevaisuudenvisiot. Suunnannäyttäjäksi ei liene myöskään hallituksen kesäkuussa julkaistavasta EU-selonteosta.