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Friday, September 6

6th Sep - Weekender: Best of the Week

The best articles from the ending week. Some of them on Europe are classics. Last week’s ‘Best of’ here.

Merkel’s lack of vision is the Achilles’ heel of EuropeTradingFloor
Lars Seier Christensen: A more rational approach could have saved us from the mess we are in, but declaring that the EU should be winning in the global economic race, which is one reason why Germany wants to keep Britain in the EU, is not a vision.

Germany must provide a vision for the rudderless ship of EuropeTradingFloor
Steen Jakobsen: Germany must provide a vision to help restructure Europe, get credit flowing again and reduce the overall debt load. The strong euro is doing the periphery no good and unemployment is sky-high. The ship needs a rudder to brace the many headwinds.

How much Europe is too much Europe? Reuters
In the dark days of Europe's debt crisis in 2012, when it seemed Greece might be forced out of the euro and the single currency could implode, leaders believed "more Europe" was the only answer.

Europe’s Destructive Creation: Why the Euro’s Biggest Problem is the Flawed Crisis NarrativeEconoMonitor
William Oman, Economist for Western Europe and Finance & Banking at RGE, argues that a flawed narrative holds back more than just the euro crisis debate.

Asset Allocation and Monetary Policy: Evidence from the EurozoneHaraldhau
The eurozone has a single short-term nominal interest rate, but monetary policy conditions measured by either real short-term interest rates or Taylor rule residuals varied substantially across countries in the period from 2003-2010.

Outright Monetary Transactions, one year onECB
Speech by Benoît Cœuré, Member of the Executive Board of the ECB, at the conference “The ECB and its OMT programme”, organised by Centre for Economic Policy Research, German Institute for Economic Research and KfW Bankengruppe Berlin, 2 September 2013

Peripherally, yoursalphaville / FT
The eurozone is straggling to recovery, though apparently in spite of the ECB failing to shore up money growth

Triple shocks threaten Europe's sickly and deformed recoveryThe Telegraph
Europe has not recovered. It has begun to stabilise, but only just, amid mass unemployment, with debt trajectories still spiralling out of control in Italy, Portugal, Spain and once again in Greece.

The sustainability of the single currency: Different rates and different fatesThe Economist
Optimists argue that if a big, diverse economy like America manages to have a single currency, Europe should too. Optimists, if not already disillusioned, will find more to dislike in this new analysis.

Towards a banking union – the state of play from the ECB’s perspectiveECB
Speech by Jörg Asmussen, Member of the Executive Board of the ECB, Handelsblatt Conference “Banken im Umbruch” Frankfurt, 4 September 2013

Portugal’s economic recovery: Between bail-outsThe Economist

Sovereign default risk and banks in the Europe’s monetary
EZ banks are more exposed to their own nation’s government bonds than ever. This column argues that Eurozone members can now afford to tell their banks to diversify, but pressure from Germany, Austria, France and the ECB might be necessary. Defusing the pernicious entanglement between the Eurozone’s weak banks and weak sovereigns would reduce the cost of any new crisis and reduce the likelihood of such a crisis occurring.

Promise and disappointments in European data – TradingFloor
Euro area economic confidence hits two-year high – TradingFloor

The portable Summersalphaville / FT
How the Fed chair race became a public circus, and why it mattersWonkblog / WP
You can’t believe everything Larry Summers says – Wonkblog / WP

The all you can eat collateral buffetalphaville / FT
When it comes to understanding the Fed’s recently touted — but initially overlooked — fixed-rate, full-allotment overnight reverse repurchase agreement facility, Cardiff covered pretty much all the bases here.

US: Revisiting the debt ceilingDanske Bank (pdf)
Once again we are heading for a budget battle in the US Congress.

Fed exit options, table du jouralphaville / FT
Which part of future Fed tightening “is now completely up in the air”? The answer (according to Societe Generale) is in the useful table

Bank Leverage Is the Defining Debate of Our TimeView / BB
Simon Johnson: There are plenty of other important debates taking place around the world, but these questions are largely settled, and many of the issues are more rhetorical than real.

Has quantitative easing worked? Reuters
The respect of traditional policy limits reduced the effectiveness of QE. If the newly created money had gone directly into consumer and business bank accounts, rather than into banks, more of it would have been used to pay off excess debts or to invest productively. But at least QE was a new idea. With some more of those, central bankers could do a better job.

Déjà vu: emerging markets and 1997 Long Short / FT

The BRICs party is
Anders Åslund: Emerging markets are under pressure. This column argues that this is not a mere headwind but that the BRICs’ party is over. Their ability to get going again rests on their ability to carry through reforms in grim times for which they lacked the courage in a boom.

Are Emerging Markets Submerging?Project Syndicate
Kenneth Rogoff: After years of solid output gains since the 2008 financial crisis, the combined effect of decelerating long-term growth in China and a potential end to ultra-easy monetary policies in advanced countries is exposing significant fragilities in emerging markets. Is the inevitable “echo crisis” in these countries already upon us?

Global FX Strategy – Debt ceiling debate looming againNordea (pdf)
or the summary.

Blogs review: The global dimension of taperingBruegel
Emerging markets have had a tough summer, as central banks of advanced economies have made clear that the normalization of monetary policy was underway. Although this development has generated a renewed interest in the international transmission of monetary policy and was a central part of the discussion at Jackson Hole, it remains unclear whether this sudden reversal in capital flows will remain mostly benign or will deteriorate into a full-fledged emerging market crisis.

Charlie Munger: Lessons From an Investing GiantWSJ
Warren Buffett's right-hand man is brilliant in his own right.

Banks, economists and politicians: just follow the moneymainly macro

How can you get an economy INTO a liquidity trap?Worthwhile

Michael Mauboussin, Interview No. 4Farnam Street
Once you understand luck’s role, you can understand how to approach the activity more thoughtfully, including how you develop skill and interpret results.

Michael Lewis on Writing, Money, and the Necessary Self-Delusion of Creativitybrain pickings

Korkojen nousu paljastaa: olemme velkaloukussaJan Hurri / TalSa
Suomen velkataakka on vuosikaudet paisunut huimasti talouskasvua nopeammin, ja velkaa on nyt tuplaten se määrä kuin vuosikymmen sitten. Enää keinotekoisen matala korkotaso peittelee karua tosiasiaa: Suomi on velkaloukussa. Totuus paljastuu, kun korot taas nousevat – ja maksuvaikeudet alkavat.

Jämeräpartaiset päättäjätSaloniemi

Työttömyyttä, luonnollisesti?Pentti Haaparanta / Akateeminen talousblogi

Hypo: Asuntolainan marginaali kiipeää jopa 2,5 prosenttiiinTalSa