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Friday, March 7

7th 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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The ECB is irrelevant and the Euro is a failurePieria
Frances Coppola: The Euro is a failed experiment. We should not waste any more effort trying to make it work. It is time to consign it to the dust of history.

Press release: In-depth reviews – Europa
Memo: In-depth reviews – Europa
Communication to the European Parliament – Europa
Macroeconomic Imbalance Procedure – Europa
EU Says Italy Faces a ‘Major Challenge’ in Reducing Debt – BB
EU warns Italy is in economic trouble, France to miss deficit targets – Reuters

ECB Said to Experiment With Governing Council Meeting MinutesBB
The ECB has started to draft trial minutes of its Governing Council meetings and will experiment with different formats in coming months, according to two euro-region central-bank officials.

What Does the ECB’s ‘Sterilization’ Program Do?WSJ
One option that has gained ground in recent weeks is for the ECB to suspend its nearly four-year-old policy of draining funds from euro-zone banks on a weekly basis, a process known as sterilization.

Euro Area — “deflation” versus “lowflation”iMFdirect
So far there is no sign of classic deflation, i.e., of widespread, self-feeding, price declines. But even ultra low inflation can be problematic for the euro area as a whole and for financially stressed countries, where it implies higher real debt stocks and real interest rates, less relative price adjustment, and greater unemployment. Along with Japan’s experience, which saw deflation worm itself into the system, this argues for a more pre-emptive approach by the ECB.

All talk, no action from ECB disappoints marketsTradingFloor
Juhani Huopainen: The European Central Bank's meeting left rates unchanged and did not introduce any new easing measures to combat deflationary threats. Instead, Draghi explained why its monetary tools would not work. The markets took note and took the EURUSD higher.

The face behind the euroFT
This time with inflation at 1 per cent there was a belief that Draghi would make some sort of compromise gesture while keeping rates on hold, even if it amounted to SMP tokenism. But, nope, he disappointed… despite the ECB’s own 2016 inflation forecast coming in well below 2 per cent. Doing nothing in the face of that isn’t exactly reassuring…Given how far off piste the ECB is, the central bank could easily justify a policy step at any time. Maybe the exchange rate will provide some sort of trigger but who on earth knows.

Seven things you absolutely need to know about Obama’s budgetWaPo
Five basic questions about Obama’s budget that you were not afraid to ask WaPo

Jobs Report Highlight: From Bad to Merely SluggishWSJ
Economists React: Hints of Spring in February Jobs Report?WSJ

Economists warn of more market 'tantrums' as U.S. Fed tightensReuters
Turbulence on Wall Street will likely return when the Federal Reserve decides to hike interest rates, top U.S. economists said in a paper that warned the Fed's huge stimulus program could have harmful consequences.

The Fed and Financial Stability: Three QuestionsWSJ
A lasting consequence of the global financial crisis is the expansion of the Fed’s mandate: It is now one of the chief guardians of financial stability. There is, obviously, good reason to think a lot more about maintaining financial stability. What’s not so obvious is how to do that.

Fed Talk Shifts to Higher RatesTim Duy’s Fed Watch
The timing of the first rate hike and the subsequent tightening is dependent upon the consensus on overshooting.  If wage growth starts to accelerate, the Fed's focus will shift from fears of too much to too little slack.  If they are concerned about overshooting, they will need to accelerate the tightening time line.  Where Yellen ultimately falls on the issue is critical.

Emerging Economies on Their OwnProject Syndicate
José Antonio Ocampo: Both ECB President Mario Draghi and US Federal Reserve Chair Janet Yellen recently asserted that their policy decisions would account only for domestic conditions. In other words, emerging economies – though subject to significant spillover effects from advanced-economy monetary policy – are on their own.

Bernanke Urges Emerging Markets to Prepare for End of Fed StimulusWSJ
Former Fed Chairman Bernanke urged emerging-market countries to do more to protect themselves from the impact of an eventual end to the Fed's economic stimulus efforts.

Robert Shiller says markets have become more prone to bubblesInstitutional Investor
The Nobel laureate contends that investors need to study human nature and history, and avoid falling victim to groupthink.

The Great Divide over Market EfficiencyInstitutional Investor
The Nobel committee decided to split the economic prize between Eugene Fama and Robert Shiller – and that’s okay.

Eurotalous kiristää vyötä kummastakin päästäJan Hurri / TalSa
Euroalue toipuu talouskriisistä muita talousmahteja hitaammin ja vaisummin. Tämä ei ole sattuma vaan rahaliiton rakennevikojen ja talouspolitiikan syytä. Näin sanoo eurotalouteen erikoistunut tutkija. Hän patistaa euromaita korjaamaan virheensä. Keinoja on kaksi: liittovaltio tai jäähyväiset eurolle.

Kruunun merkitys Ruotsin menestykselleRoger Wessman
Finlands sak är svårLars Calmfors / DN
I vanliga fall har valet av valutasystem ingen större betydelse, där­emot i kritiska lägen. Finland hade haft lättare att möta sin strukturkris om man inte gått över till euron.

Jouko Marttila & ReaganMoreLiver’s

Kansantaloudellinen aikakauskirja 1/2014Taloustieteellinen Yhdistys

Rupla ja Suomen vientiRoger Wessman

High yieldistä ??meli-nimimerkilleMoreLiver’s

Talouden kylmä sota kävisi kaikille kalliiksiJan Hurri / TalSa
Venäjän painostaminen talouspakottein on vaikeaa, ja yritys kääntyy herkästi pakottajia itseään vastaan. Länsi tarvitsee Venäjän energiaa kipeämmin kuin Venäjä lännen rahoja. Talouden kylmä sota kävisi kalliiksi kaikille, mutta raskaimmin kärsisivät Länsi-Euroopan energiajuopot uhoajat.

Vaihtotaseylijäämä sopii taantuvalle taloudelleRoger Wessman