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Sunday, May 19

19th May - Weekender: Linkfest

I have a simple personal policy. (Almost) always tell the truth and sooner rather than later. By introducing myself as someone who always says what I think and feel I differentiate myself from polite-clowns. This prepares them for "surprises", and is a polite warning.

The pros are obvious: I never have to worry about what I should or should not say. I also do not have to remember a storyline. Often people tell different stories to different people. In groups, these differences create a nasty matrix to remember. Also, any ethical issues are wiped out of the equation: if you cannot tell what you are or were doing, it's not worth doing.

These pros are also cons. Stories and little lies lube the bureaucratic machineries, and people get what they expect and are happy with the expected results. Everybody kind of knows that the tenth theme stock fund of the company will not be useful or alpha-generating in any sense, but it is built nevertheless. Everyone just forgets that the past nine have not worked. Women have to be told they are beautiful. Companies have to be told how wonderful places they would be to work for etc.

* * * 

This weekend's linkfest has several important themes. The monetary transmission problems, i.e. lack of lending at acceptable rates in the crisis countries is an important theme, as the ECB is preparing something, and understanding the implications of any plan is important. The Federal Reserve's plans for the QE programs is another issue, but there is little to go by currently - only the idea, that all this talk is preparing the markets for the QE to end at some point. Will it be ended is another question.

Hollande's demands for a federal framework with a president and all in two years' time is interesting, but lacks specifics. It is an important development, though, as reactions and attitudes from Germany can be used to decipher what the Germans will do after their elections. I would not trust anything coming out of Germany before the elections are coming, though. Cyprus papers from the IMF are also out.

The US consumer sentiment for May surprised positively on Friday. Given the newsflow, this is strange, but expected: the macro has been bad, and it is about time for the numbers to start surprising positively again. Remember, in a largely trendless environment with a small positive drift, the expectations tend to follow the recent numbers, and are currently probably a bit too negative. Market reaction to positive surprises should be now watched closely. If the risk markets are unable to rally on the good news, it is a sign that the recent bull trend has been relying a bit too much on QE and liquidity, instead of fundamentals. 

And let's not forget Japan! Abenomics is all the rage and not a day goes by without an article. Today I have several. In addition, I revived my Off-Topic section with some Psych and Tech articles, and plenty of Finnish articles as well. The publication of the agreement on the Greek-Finnish collateral deal was the big news of the week, but there are other issues as well.

Previously on MoreLiver’s:

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Brussels blog round-up for 11 – 17 MayEuropp / LSE
France in recession again, ‘Schwabylon’, and how to become a British Eurosceptic.

Europeans expect bleak future, survey findseuobserver
Europeans expect a more difficult and uncertain economic future than their parent, according to an opinion poll released Friday.

Europe needs its Martin LutherLa Repubblica / presseurop
The EU is becoming a corrupt church where Germany rules by a dogmatic economic orthodoxy. Politics must take back control with a protestant schism coming from grassroots initiatives, argues an Italian columnist.

France Must Lead Breakup of EuroView / BB

Europe’s Economics Chief Tries to Peel Off ‘Mr. Austerity’ LabelNYT
Olli Rehn, the European Union’s top economic policy maker and scourge of debt-fueled budget deficits, is fed up with austerity. Or at least with being tarred by a term that “is clearly used to label somebody as an unworthy person who is almost eating children.”

That's a 'Depression'The Atlantic
The Old Continent has that 1930s feeling: Europe's double-dip is officially longer than its great recession

[audio] BizDaily: Which way for the eurozone?BBC (mp3)
We learned this week that Europe, or at least the eurozone, has been in recession for eighteen months. The financial crisis continues to bear down on economic prospects and many issues about the business environment continue to worry executives. Andrew Walker has been hearing the views of senior business people about what Europe needs to do. Plus, Helge Lund, chief executive of the Norwegian oil and gas giant Statoil tells Andrew about the suspected manipulation by Statoil and other companies of published oil prices that act as important benchmarks across the industry.

Charlemagne: What is the alternative?The Economist
Europe waits as Angela Merkel faces a new anti-establishment party

Crisis of Friendship: Split Persists Between Berlin and ParisSpiegel
As a further sign that all is not well in the Franco-German motor of Europe, the two countries will not issue a joint statement ahead of the next EU summit as Berlin had hoped. The development comes as France slips further into economic malaise.

World from Berlin: 'Austerity Is Making European Economy Sicker'Spiegel
The European common currency zone has now been in recession for six straight quarters, with three of the bloc's four largest economies now suffering persistent negative growth. Could the Continent's pursuit of austerity be backfiring? German commentators believe the answer is yes.

Possibility of Spanish downgrade looms over euro zoneMacroScope / Reuters
A cut to sub-investment grade would prompt Spanish sovereign debt to fall out of certain indices tracked by bond funds, resulting in forced selling, which could drive Spanish borrowing costs higher.

Blogs review: Dealing with an impaired monetary transmission mechanismBruegel
Dealing with the fragmentation of capital markets along national borders and the resulting lack of funding for SMEs in the countries of the periphery has been a central issue for the ECB for some time already. But the prospect of a prolonged double-dip has rendered it even more urgent. In this review, I document the extent to which the transmission mechanism of monetary policy within the eurozone is broken and discuss several proposals – such as a negative lending deposit rate and the creation of a new program targeted to SMEs – designed to increase the flow of credit in the periphery.

Does the eurozone have a monetary policy transmission mechanism? Or rather a liquidity leak?Marginal Revolution
Liquidity trap approaches will encourage you to think in terms of raising expectations of inflation (which is indeed the correct question in many settings), but here the geographic distribution of credit and economic activity is instead the crux of the matter.

“Built to Last”: The New Euro Area FrameworkECB
Speech by Yves Mersch, Member of the Executive Board of the ECB, Barclays Research Conference, London, 17 May 2013

Only the ECB can improve bank credit supplyFree exchange / The Economist
The ECB must overcome any obstacles to introducing a version of the Funding for Lending Scheme. Without it, there seems little prospect of a recovery in bank credit supply in the Eurozone.

The periphery's problem is an incomplete internal devaluationFree exchange / The Economist
A direct result of the failure to recognise the “stock” implications of an internal devaluation. A self-fueling negative equilibrium results, and the only question is how it resolves itself.

How Safe Should Bank Deposits Be?WSJ
A new EU law designed to force states to build up deposit-guarantee funds has been stuck in the bloc’s decision-making process for almost three years. And even in the countries whether they exist, the funds remain way too small to credibly cover the €100,000 per bank account they are supposed to guarantee.

Battling the Crisis: Disunity Plagues EU Banking Union TalksSpiegel
European leaders had hoped to quickly finalize plans for an EU banking union to regulate bank bailouts and provide a roadmap for unwinding insolvent financial institutions. But with the German election looming, Berlin is wary of moving forward. The result could be a lengthy delay.

Europe's EUR 500 Billion Ticking NPLTime BombZH

Spot The Odd Continent Out: Total Bank Assets As % Of GDPZH

It might be worth paying attention to what is going on in London, Paris and Berlin, where different visions of Europe, which we ought to be debating, are developing.

Europe can survive without Britain, says François HollandeThe Telegraph
François Hollande launched a three-pronged attack on Britain saying that Europe would survive without the UK, while claiming David Cameron risked splintering the EU and that his austerity policies were failing.

France's Hollande urges euro zone governmentReuters
French President Francois Hollande called on Thursday for an economic government for the euro zone with its own budget, the right to borrow, a harmonized tax system and a full-time president.

Hollande goes on the offensive - two years to achieve political union in EuropeOpen Europe
Another reminder of how distant France and Germany are in the debate over the way ahead for the eurozone - with Paris sticking to its 'solidarity/integration first and supervision/discipline later' line, and Berlin insisting that things should evolve the other way around. 

France: ‘Hollande, (is finally) an unabashed social democrat’La Tribune / Presseurop

Political union: Hollande takes up Merkel’s challengeLe Monde / Presseurop

François Hollande vows plan to end Europe's 'lethargy'The Telegraph

Brussels, Berlin lukewarm on Hollande's euro zone visionReuters

Italy says French call for European govt should be consideredReuters

Cyprus: Letter of Intent, Memorandum of Economic and Financial Policies, and Technical Memorandum of UnderstandingIMF (pdf)

Cyprus: Request for an Arrangement Under the Extended Fund FacilityIMF

Cyprus and the IMFCFR

Report Raps Cyprus Over Money LaunderingWSJ

Weekend Sentiment SummaryThe Short Side of the Long

Confidence Boom?Tim Duy’s Fed Watch

S&P 500 P/E Ratio Bespoke

Five takeaways from the CBO's analysis of Obama's budgetWonkblog / WP

Economic Prospects for the Long RunFED
Chairman Ben S. Bernanke At Bard College at Simon's Rock, Great Barrington, Massachusetts, May 18, 2013

Ben Bernanke on robots, lasers and the Great StagnationWonkblog / WP
Bernanke Isn't Neutral on the Long-RunTwenty-Cent Paradigms

Fed Officials Looking Closely at Student DebtWSJ

Kocherlakota on Fed stimulus: Don’t stop ‘til you get enoughMacroScope / Reuters

Japan Is Back: A Conversation With Shinzo AbeForeign Affairs
Japan's prime minister speaks openly about the mistakes he made in his first term, Abenomics, Japan's wartime record (and his own controversial statements on that history), and the bitter Senkaku/Diaoyu Island dispute with China.

Bird, plane, Abealphaville / FT

Abe’s master planThe Economist

Briefing: Japan and Abenomics: Once more with feelingThe Economist

Abenomics and the Supply of Safe AssetsMacro and market musings

Why Japan Is Bad For The WorldAsia Confidential
Better figures, but…Bond yields spike…Yen decline is good for Europe?...When does retaliation begin in earnest?

Open-Access EconomicsProject Syndicate
Barry Eichengreen: The brouhaha over Carmen Reinhart’s and Kenneth Rogoff’s article “Growth in a Time of Debt” has raised troubling questions not only about the efficacy of austerity, but also about the reliability of economic analysis. If a flawed study could appear in a prestigious working-paper series, why should anyone trust economic research?

Book Bits | 5.18.13The Capital Spectator

Global property markets: Boom and gloomThe Economist
Our latest round-up of house prices reveals some sharp contrasts

Bloomberg BillionairesBB

What Rational Really MeansSciAm
The word rational is widely misused. Scientists often apply it unnaturally, in ways that conflict with our biology.

Psychiatry: Shrink wrappingThe Economist
A single book has come to dominate psychiatry. That is dangerous

DSM-5: By the bookThe Economist
The American Psychiatric Association’s latest diagnostic manual remains a flawed attempt to categorise mental illness

This Is Your Brain, OnBook forum
Two books seek to explain how our minds work their way through the maze of consciousness

The PossibilianThe New Yorker
What a brush with death taught David Eagleman about the mysteries of time and the brain.

Why Rituals WorkSciAm
There are real benefits to rituals, religious or otherwise

The Cherry Coke Effect?The Psy-Fi Blog

FramingAbove the market

Jaron Lanier: The Internet destroyed the middle classSalon
Kodak employed 140,000 people. Instagram, 13. A digital visionary says the Web kills jobs, wealth -- even democracy

Welcome to the Programmable WorldWired
In our houses, cars, and factories, we’re surrounded by tiny, intelligent devices that capture data about how we live and what we do. Now they are beginning to talk to one another. Soon we’ll be able to choreograph them to respond to our needs, solve our problems, even save our lives.

Social networks as evolutionary game theoryalphaville / FT

Living by the Numbers: Big Data Knows What Your Future Holds – SpiegelSpiegel
Forget Big Brother. Companies and countries are discovering that algorithms programmed to scour vast quantities of data can be much more powerful. They can predict your next purchase, forecast car thefts and maybe even help cure cancer. But there is a down side.

Ranskan inhokki patistaa liittovaltioonHenri Myllyniemi / Piksu

Vakuusrahojen alkuperä Henri Myllyniemi / US Puheenvuoro

Ministerinvaihdoksia ding dong –tyyliinJyrki Virolainen

Pankki: Asuntojen hinnat voivat romahtaa SuomessaTalSa

Ostovoimasta ja sisäisestä devalvaatiostaJuha Remes / US Puheenvuoro

EKP on suurin syyllinen Euroalueen velkakriisin Tyhmyri
Pienten maiden kuten Suomen kannalta kriisinhoidon jäljet pelottavat

Suomi arvostaa tappioitaRisto Pennanen / TalSa
Rahan tuhlaaminen on Suomessa hyväksyttävämpää kuin voiton tavoittelu.

Pääkirjoitus: Ministerien kierrätys ei riitä Sdp:n nousuunHS

Kansanäänestys EU-jäsenyydestä on perusteltu SuomessakinSampo Terho

Vakoilijatädin sukulaisetKemppinen
Kerran hän kysyi, miten se sellainen pitkä poika on pärjännyt, jonka he kustansivat aikoinaan ties mihin ja jonka järjestelyihin hän oli osallistunut. Nimi oli Paavo Lipponen. Kerroin. Pari päivää sitten sain kuulla, että vakoilijatäti elää täyttä häkää vanhainkodissa ja on vasta 98-vuotias. Hänen puolisonsa, vakoilijasetä, sitä vastoin kuoli kymmenkunta vuotta sitten.

VTV:n Pöysti: Ministeriön osattava tehdä julkisuuspäätökset itseHS
Valtion taloudenpitoa valvovan valtiontalouden tarkastusviraston pääjohtaja Tuomas Pöysti kritisoi ulkopuolisen avun ostamista valtiovarainministeriön vakuuspapereista tekemiin salaamispäätöksiin.
Kreikan vakuudet

Vihreiden Brax syyttää hallitusta EU-politiikan kaunistelustaHS

"Työeläkejärjestelmä on ris­ti­rii­das­sa pe­rus­tus­lain kans­sa"TalSa
Eläkevaikuttaja Tarmo Pukkila kehottaa Helsingin Sanomien mielipidekirjoituksessaan Finanssivalvontaa tarkistamaan, onko eläkevakuutusyhtiöiden vallankäyttö perustuslain mukaista. Toimistopäällikkö Vesa Hänninen kertoi Fivan näkemyksen asiasta Taloussanomille.