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Friday, April 25

25th Apr - W/E: Best of the Week

Here are the ”best” from my posts of the ending week.

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Euro-Zone Fiscal ColonialismPhilippe Legrain / NYT
The primary cause of the crisis was the reckless lending of German and French banks

Europe’s Next Moral Hazard Project Syndicate
Hans-Werner Sinn: The limit beyond which eurozone governments' creditors become anxious has been raised significantly by the bailout architecture put in place over the last two years. This will bring a few years of calm as debt levels climb steadily to that limit, before the architecture collapses, injuring ordinary citizens the most.

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.

A New ECB Outlook? Part IPIIE
A New ECB Outlook: Part IIPIIE

ECB FX intervention, de facto or otherwiseFT
Direct FX intervention been done it before by the ECB and if, as Rajan suggests, the externalities of QE and FX intervention are possibly similar while the difficulties of implementation are not, than you wonder why direct intervention appears to be so far down Draghi’s list of actions? Presumably the external political cost of intervention is still much higher than for QE.

Here’s a Checklist for Mario DraghiWSJ

Shrinking timesBruegel
Over the last 5 years, the Eurozone financial system has been flooded with liquidity, due to the ECB’s very special response to the very special bank-sovereign euro crisis. 

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

Euro area deflation monitorDanske Bank

Russia to face recession on geopolitical woesDanske Bank

More Greek Statistics? Troika Confirms Primary SurplusWSJ
Eurostat reported Wednesday that Greece had a government deficit in 2013 of €23 billion, and spent €7.2 billion on interest payments. That makes the primary balance—under the definition widely used by economists and Eurostat itself—a deficit of €16 billion, or 8.7% of Greece’s gross domestic product.

Periphery business cycle monitorDanske Bank
We expect most euro-area periphery countries to continue to show positive GDP growth. Survey data are at relatively high levels and the improvement is also seen in hard data, where industrial production is slowly increasing while retail sales have stabilized

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.

Markets beginning price in US inflation stabilizingSober Look
The markets are starting to take notice. The latest TIPS auction showed a sudden increase in investor demand. The five-year breakeven rate (a rough measure of implied inflation expectations) jumped as a result.

Don’t Look Now, but Rising Wages Could Spell Trouble for the FedWSJ

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

What did QE ever do for us?FT
A new Bank of England paper from external MPC member Martin Weale released today tries to put a figure to how much QE boosted national output and inflation in the UK and the US.

IMF: Fed Bond-Buying Delivered ‘Significant’ Boost to U.S. EconomyWSJ

Suomalainen ei usko ennenkuin näkee - EU ja euro nähtyToimi Kankaaniemi / US
Suomi on ollut yli 19 vuotta Euroopan unionin jäsen ja yli 12 vuotta euroalueessa (euron käyttäjänä). Missä tahansa asiassa tuollaiset ajat ovat riittäviä osoittamaan, minkälaiset kokemukset ovat. Sananlasku sanoo, että "suomalainen ei usko ennenkuin näkee". EU ja euro on nähty.

Suomen osallistumiselle euroalueen liittovaltiokehitykseen on vaihtoehtojaTalous ja Yhteiskunta
Peter Nyberg on ollut selvittämässä niin Suomen 1990-luvun kriisiä kuin eurokriisiäkin. Hän pitää rahaliiton suurimpana vikana sitä, ettei sopimuksia ja määräyksiä noudateta. Korkoerojen annettiin hävitä ja luotonannon laajentua, kunnes kriisi puhkesi. Kriisimaita on tuettu, jotta yksityiset sijoittajat pääsisivät pois. Pankkien pääomavaje muodostaa edelleen vaaran. EKP on helpottanut kriisiä mutta ylittänyt valtuutensa. Pankkivalvojalta ja -unionilta ei kannata odottaa liikaa, koska ongelmia ei ole ennenkään havaittu ajoissa. Suomen kannattaisi puolustaa itsemääräämisoikeuttaan ja irtaantua yhteisvastuusta ja liittovaltiokehityksestä, tiukan paikan tullen koko rahaliitosta.

Muualla vyö alkaa löystyä mutta Suomi kiristää lisääJan Hurri / TalSa
Suuret euromaat Ranska, Italia ja Espanja aikovat keventää julkisen talouden vyönkiristyksiä. Saksa aloittaa uusia elvytystoimia alijäämän kasvusta huolimatta. Suomi sen sijaan jatkaa vyönkiristyksiä. Muut painavat kaasua, Suomi jarrua – muualla talous kasvaa, Suomessa ei.