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Sunday, April 20

20th Apr - W/E: The World

Some hope the European Central Bank will use quantitative easing to help the fragile region, but as Albert Gallo, head of macro credit research at RBS, points out, with sovereign bonds already at multiyear lows QE will not help where it is needed:

Previously on MoreLiver’s:

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The State of Europe: End of the crisis or crisis without end?BIS
Speech by Dr Andreas Dombret, Member of the Executive Board of the Deutsche Bundesbank, to the Federal Reserve Bank of Dallas, Dallas, 15 April 2014.

Derivatives and the Eurozone
The sovereign bond spreads of peripheral Eurozone countries surged while the economic conditions were gradually deteriorating. This column provides a new explanation for this phenomenon. It suggests that the markets in credit default swap indices have exacerbated shocks to economic fundamentals. The same change in fundamentals had a higher impact on the spread during the crisis period than it had previously.

A UK housing bubble or something else?Sober Look
Just to put this in perspective, US home prices are now roughly at the levels they were a decade ago. UK home prices have risen over 40% over the same period.

Structural reform in southern Europe: Patchy progressThe Economist

Wages, productivity, and employment in
By focusing exclusively on flexibility, past labour market reforms have completely neglected incentives. There is severe allocative malfunctioning in the Italian labour market. Wages do not reflect sector productivity in the short run, while in the long run they rise in sectors in which productivity falls.

How Do You Say “Nobody Could Have Predicted” In Swedish?Krugman / NYT
Sweden has stopped flirting with deflation and moved right in.

European Debt Deflation Krugman / NYT
Low inflation/deflation precisely where it does the most harm.

Swedish central bankers and Korean ferryboat captainsThe Money Illusion

Eight EU states in deflation as calls grow for QE in SwedenThe Telegraph
Sweden’s Riksbank admitted in its latest monetary report that something unexpected had gone wrong

ECB moving closer to unconventional policySober Look
The tricky part is that the more effective the monetary transmission, the riskier are the assets.

Constructing negativity and the ECBFT
How a move to negative is constructed will, of course, have much to do with what it is intended to achieve — a weaker euro at last check — but we also can’t help but think it would be cool to make sure it won’t cause too much harm either.

Russia to face recession on geopolitical woesDanske Bank

Divided we stand: Where do EU states stand on further sanctions on Russia?Open Europe

US financial showdown with Russia more dangerous than it looks The Telegraph
The US Treasury faces a more formidable prey with Russia, the world's biggest producer of energy with a $2 trillion economy, superb scientists and a first-strike nuclear arsenal

Europe’s Security CatalystProject Syndicate
Russia’s annexation of Crimea and threats against Ukraine are a reminder to the countries of Eastern Europe, particularly those in the Balkans, of NATO’s centrality to national – indeed, European – security. But maximizing NATO's effectiveness requires it to deepen its engagement with its most vulnerable members.

Putin’s strategic miscalculations will cost RussiaFT
Moscow seems determined to get its way in Ukraine. Its overriding aim is to prevent Kiev from aligning with Europe and the west. It may well succeed in the short term. But in the longer term, Vladimir Putin is bound to fail.

How Russia Turned Ukraine's Economic Crisis into Geopolitical WarfareEconMatters

Geneva deal won’t counter Russian resolveFT
There was no commitment by Russia to pull back the tens of thousands of troops it has massed on Ukraine’s border, which Washington and Brussels have both been pressing for.

No Fear FactorQuartz
With western oil companies tripping over themselves to assure Putin, it’s no wonder he’s so confident

Russia and Ukraine: InsatiableThe Economist
The cost of stopping the Russian bear now is high but it will only get higher if the west does not act

Boys from the blackstuffThe Economist
The government of Kieve has no obvious counters to Russian-inspired occupation of industrial sites

The military balance: Gathering stormThe Economist
Russia would find holding the territory of Ukraine harder than taking it.

Financial sanctions: Turning off the tapsThe Economist
More could be done to punish Russia.

Has US household deleveraging ended?
Household deleveraging in the US has impeded consumption and market activity in recent years, holding back the recovery. Despite substantial progress in balance sheet repair, a key question is whether deleveraging has ended or whether further adjustment is needed. This column presents time-varying equilibrium estimates of the household debt-to-income ratio determined by economic fundamentals. Taking into account the latest available data, the estimates suggest that the household deleveraging process may have ended at the end of 2013.

Don’t Know Much About History, Rand Paul EditionKrugman / NYT
Public and Private Sector Jobs: Carter, Reagan, Bush, Clinton, Bush, ObamaCalculated Risk

Monetary policy and the economic recoveryFED
Chair Janet L. Yellen at the Economic Club of New York, April 16, 2014

China’s Bloated Financial System: A Quick GuideThe Big Picture

BOJ Hopes for Slowdown in Overseas Production ExodusWSJ