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Sunday, June 2

2nd Jun - Weekender: Best of the Week

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

Previously on MoreLiver’s:

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Are we nearly there yet?alphaville / FT
The short answer, when it comes to eurozone adjustment post-crisis, is No. David Mackie and team at JP Morgan reckon we are maybe halfway there.

Procyclical Policy for GermanyKrugman / NYT
Strange arguments against fiscal expansion.

German Constitutional Court: Hearing in June unlikely to provide definitive answers on OMTDB Research

EU shifts policy focus in quest for growthReuters
After three years of deep spending cuts, the European Union confirmed a shift in policy on Wednesday, telling countries they must focus on structural economic reforms to boost growth, while not abandoning budget discipline.

Banking union’s house of twigs (with cut out and keep optionality) alphaville / FT
JP Morgan’s Alex White: It has been clear for some time that this is not fully achievable in the near term, because of the extent of the institutional journey required (likely including the prospect of Treaty change).

OECD: ECB needs to come to euro zone's rescue againReuters
Calling for bold steps beyond just interest rate cuts.

Euro zone private loans contract, pressuring ECB to actReuters
Loans to the euro zone's private sector contracted for the 12th month in a row in April, raising pressure on the ECB to take fresh policy action to help lift the bloc out of recession.

Statistical press release: Monetary developments in the euro areaECB (pdf)

Press release: Financial Stability Review May 2013ECB
Full pdf, key risks: 1) A further decline in bank profitability, linked to credit losses and a weak macroeconomic environment 2) Renewed tensions in sovereign debt markets due to low growth and slow reform implementation 3) Bank funding challenges in stressed countries 4) Reassessment of risk premia in global markets, following a prolonged period of safe-haven flows and search for yield.

Too-Big-to-Fail Myths, Goldman Sachs EditionView / BB
The largest U.S. banks keep rolling out new arguments to counter the growing impression -- among lawmakers especially -- that they present an unacceptable threat to the economy.

Taper bomb-proofingalphaville / FT
If or when the Fed starts to taper, where will the pain land first? Barclays analysts Guillermo Felices, Michael Gapen and Sreekala Kochugovindan have taken a shot at answering that question expecting the Fed to start backing itself out at the start of 2014

The New Tapering Normal Optimism In ChartsZH
That all the increase in risk assets has been on the back of multiple expansion for the past year is by now not news to anyone. What may come as a surprise to some who have not been paying attention, as Morgan Stanley conveniently reminds us, is that corporate profits have been declining not for one or two quarters, but for two full years now.

The Fed's tricky messaging: Tapering is not tighteningWonkblog / WP
Rosengren’s comments signal yet another way the Fed could tailor its bond purchases to the economy and do more with less. Maybe not only is tapering not the same as tightening, but tapering could eventually lead to more easing.

Primer on Japan in Four PostsMarc to Market

Abenomics to make or break JapanNordea (pdf)
Or the summary.

Rethinking AbenomicsWSJ

What's going on in Japan?Buttonwood / The Economist
Another sharp fall in Japan's stockmarket this morning (5.2% on the Nikkei, 3.8% on the Topix) raises broader questions about the euphoria that greeted the introduction of Abenomics.

Is This China's 'Minsky Moment'?ZH
SocGen: Since 2009, China’s credit growth has outpaced nominal GDP growth in every quarter except one (Q4 11)… The increase in credit demand is disproportionally larger compared to the recovery in investment appetite so far. This raises the question whether activity growth will really follow and if so by how much?

The view from PimcoButtonwood / The Economist
Artificially assisted growth and purchased financial stability may breed shortfalls and asset bubbles * International and regional systems may fragment, and growing income inequality may destabilize geopolitics * Supply shocks and currency debasements may lead to higher and less stable inflation * Absent a growth revolution, haircuts may increase over the secular horizon

Global Central Bank Focus May 2013: Into the Woods PIMCO
Excess liquidity, falling net issuance and higher correlations among assets complicate the eventual exit that the Federal Reserve and other central banks must make from their extraordinary policies. The Bank of Japan’s ideology has completely changed to “tackling deflation” from “tolerating deflation.” The key focus in the coming months will be how private sectors react. Investors who depend chiefly upon central bank activism may put themselves at risk. They may need to hedge volatility by ensuring their investments are built more on solid fundamentals and reasonable valuations.

Three Measures of Central Banks’ EffectivenessThe Big Picture
Fed, BoE, ECB, BoJ compared.

There's a problem with the transmission....Coppola Comment
Not only does QE fail when damaged banks aren't lending normally, but it actually impairs the transmission mechanism itself. This might explain why QE seems to become less effective the more of it you do. It's like hard water. It gradually clogs up its own pipes.

FX Comment: take a breath!Nordea

OECD Economic OutlookOECD
The global economy is moving forward, but divergence between countries and regions reflects the uneven progress made toward recovery from the economic crisis…Historically high unemployment remains the most serious challenge facing governments.

IMF Searches Soul, Blames EuropeWSJ
In the second of its mea culpas, the IMF examines past debt restructurings and what could be improved in the future.

The IMF Revisits Sovereign Debt Restructuring, Not the SDRMPIIE

Stress Indicators: Fixed income carnage?TradingFloor
Steen Jakobsen: This week our Stress Indicators show signs of panic in fixed income. The CRB commodity index is broken and the super cycle looks to be confirmed while the US Index has decisively changed. Meanwhile, the IMF and EU continue to play pretend-and-extend.

Things That Make You Go Hhmm...Grant Williams / ZH
37 pages of goodies.

Koottu IMF-aiheinen tietopaketti suomalaisilleHenri Myllyniemi / US Puheenvuoro

Määritelkää vihapuheHannu Visti

’Kaipaatko devalvaatiota? Olet siis neuvosto- eikun siis eurovastainen.Tyhmyri

Euro-ovet sulkeutuvat yksi kerrallaan Henri Myllyniemi / US Puheenvuoro

Suomi ei saanut Kreikalta vakuutta HS
Kreikan uusi lainajärjestely on todennäköinen, koska valtion velkaantuminen kiihtyy