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Friday, March 21

21st Mar - W/E: Best of the Week

Here are the ”best” from my posts of the ending week. Last week’s edition here.

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Even a billionaire cannot save the EU from itselfReuters
“Only in retrospect,” Soros writes, did he come to see the euro zone as structurally flawed. It is vulnerable to shocks like the crash of 2008, it lacks common fiscal or political policies and its most powerful nation — Germany — is reluctant to take the bold steps that could secure the currency and the EU. The ultimate failure of the euro zone project will be Germany’s fault, he says.

ECB Data Demands Called Excessive by Banks Facing Asset ReviewBB
Euro-area banks urged the ECB to reduce the information they have to provide as part of a review of their balance sheets because they say the demands are excessive.

Bankers fear leaks from ECB health checkReuters
Bankers are worried that sensitive information will leak out before the official publication of the bloc's review of bank balance sheets, triggering speculation and making investors uneasy.

Europe strikes deal to complete banking unionReuters
Europe took the final step to complete a banking union on Thursday with an agency to shut failing euro zone banks, but there will be no joint government back-up to pay the costs of closures.

QE Not the Only Option for ECB on Inflation WSJ
The solution is a thorough cleanup of the banking system of the sort that the ECB is currently orchestrating.

ECB needs cunning plan to join currency warsReuters
The euro is at two-and-a-half-year highs, a strength that could drive ultra-low inflation even lower. In principle, the European Central Bank is squeamish about blatantly targeting a weaker euro. But it need have no qualms about picking policy tools that maximise currency damage.

From firmly to weakly anchored, or the the importance of an adverb!Money Matters
Having weakly rather than firmly anchored inflationary expectations would have justified some action to fortify them on the occasion of the last ECB Governing Council meeting. Instead, if we take exchange rate movements as an indicator of inflationary expectations, the strengthening of the € which followed the press conference in March shows that, instead, the lack of action from the ECB has further weakened the anchoring of inflation.

Squaring the Circle: A QE for the ECBMarc to Market
Perhaps the ECB can learn something from the Swiss National Bank.  Recall that when confronting deflation a few years ago, the SNB's ability to implement quantitative easing was limited by the fact that its domestic bond market is too small.  Forced by circumstances, the SNB opted for buying foreign bonds…While not constrained by size of the local bond market, the way the Swiss National Bank was, the ECB is constrained in a different way.  Buying foreign bonds appears to be a way to square the circle. 

Yellen and the Fed, a WSJ BriefingWSJ
Free downloadable e-book!

Fed Shouldn’t Use Rates to Target Bubbles, Paper SaysWSJ
Fed officials have started warming up to the notion that they might one day need to raise interest rates to prevent dangerous asset bubbles from inflating too much. A new paper has a simple warning: Don’t do it.

Special: FOMC MeetingMoreLiver’s

Five reasons why the long-term jobless don’t matter to the economyWaPo

Long-term jobless face a dark future in U.S.: studyReuters
The millions of Americans suffering through long stretches of unemployment could be left behind as the economy strengthens, a study by an influential former White House economist found.

China is shaking, sending ripples from Perth to PeruGeorge Magnus

Global FX Strategy: EURUSD will fall.. If US fallsNordea
Will the EURUSD fall, when Fed eventually starts its hiking regime? Not necessarily. Find our thougths on that, as well as updated stories on GBP, CHF, SEK and NOK in this edition of our monthly Global FX Strategy.

European FI Strategy: Not another crisisNordea
Flight-to-quality flows have pushed bond yields lower again, and risks remain tilted towards lower yields, as tensions between Russia and the EU/US over Ukraine / Crimea could easily escalate. On the central bank front, the ECB is struggling with a strong currency.

Emerging Markets Briefer - March 2014Danske Bank
Geopolitics and Chinese slowdown – a terrible cocktail

Distorted Markets & Disillusionment One Asset At A TimeZH
Citi’s Matt King: reach for yield has distorted primary and secondary markets, forced risk-averse investors into alternative asset classes, distorted markets beyond any fundamentals, and left markets incredibly illiquid. This sets up a problem that we are already seeing as investors are disillusioned one asset at a time.

Fund Managers' Current Asset Allocation – MarchThe Fat Pitch
What has been particularly remarkable is how long managers have been highly overweight equities (virtually all of 2013 and so far in 2014). This is longer than any period during the 2003-07 bull market (yellow shading). In September, exposure to global equities was the second highest since the survey began in 2001.

Industrial Commodities UpdateShort Side of Long
After a 3 year downtrend, Copper is moving into a panic sell off * Brent Crude is at a decision point and a breakdown looks likely!

The Finance Macro Canon Noahpinion
Stop me if you've heard these one before: 1. Inflation is caused by increases in the money supply…

Komissio sumutti itselleen lisää talousvaltaaJan Hurri / TalSa
Suomen eduskunnalle ja muidenkin EU-maiden parlamenteille on lähes pyhä asia, että kansalliset budjettipäätökset pysyvät kunkin maan omassa vallassa. Silti EU:n komissio on halunnut ja saanut tuntuvasti lisää talouspolitiikan valtaa. Komission valtaa ovat kasvattaneet kriisi – ja silkka sumutus.

IMF:n loppulausunto Suomen taloudesta
Tiivistelmä suomeksi – Suomen Pankki
Alkuperäinen englanniksi – Suomen Pankki

Euroopan keskuspankin Kuukausikatsaus 3/2014Suomen Pankki