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Saturday, August 23

23rd Aug - W/E: Best of the Week

The more interesting articles from the ending week's posts.

Previously on MoreLiver’s:

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Quote of the Week: 
My guess is that the ECB will not do any of these things. It will continue blaming eurozone governments for not implementing structural reforms. Eventually, it will adopt a programme of asset purchases that is too small, which it will abandon prematurely at the first sign of recovery. The result is that the eurozone will end up looking like Japan, but with one difference. Countries whose policy goes off track have nowhere to go. The member states of a monetary union have alternatives. By failing to deliver on its inflation target, the ECB could give member countries a good reason to leave the eurozone: they could have a better central bank. My advice to the ECB: do not let that happen. (M√ľnchau / FT)

Draghi has few legal ways to fix the euroFT
By pussyfooting around with liquidity policies instead of acting on inflation, the ECB has signalled that it is safe to bet against the inflation target

ECB in policy limbo, boxed in by its own plansReuters
The ECB is in a policy no man's land, bombarded by news of a stagnating euro zone economy but hesitant to move forward with new stimulus until measures it loaded in June have ignited.

Blogs review: The forever recessionBruegel
As the recovery takes hold in the US, Europe appears stuck in a never-ending slump. With the ECB systematically undershooting its inflation target and recent signs that inflation expectations could become de-anchored, the bulk of commentators in the blogosphere are again calling for more monetary actions. Noticeably, some have completely lost hope in the ability of the European institutions to turn this situation around and are now calling for countries to simply break away from the EMU trap.

Europe Facing The New Economic NormalEconmatters
George Friedman: It is becoming increasingly reasonable to believe that rather than an interlude in European prosperity, what we now see is actually the new normal. The key point is not that Germany's economy has contracted by a trivial amount. The point is that it has come time to raise the possibility that it could be a very long time before Europe returns to its pre-2008 prosperity and to consider what this means.

Worse than the 1930s: Europe’s recession is really a depressionWaPo
It's a policy-induced disaster. Too much fiscal austerity and too little monetary stimulus have crippled growth like almost never before. Europe is doing worse than Japan during its "lost decade," worse than the sterling bloc during the Great Depression, and barely better than the gold bloc then

Stiglitz Says Stalling Euro Area Shows Dismal FailureBB
Euro-area austerity policies to tackle the region’s debt crisis have been a “dismal failure” as economic growth grinds to a halt, Nobel laureate Joseph Stiglitz said.

Nobel economists say policy blunders pushing Europe into depressionThe Telegraph
German Chancellor Angela Merkel defends eurozone and says it is hard to manage a currency for 18 states

The Italian Runaway TrainA Fistful of Euros
With markets continuing to finance debt levels that any official study will soon have to recognize as unsustainable lack of proactive policies from the ECB will only fuel concerns that the size of the pill may become just too big for the bank to persuade Germany comfortably swallow, leaving the specter of private sector involvement to once more rear its ugly head.

Italy’s Downward SpiralProject Syndicate
Hans-Werner Sinn: Italy is now in a triple-dip recession. But it didn’t get there by itself: Though the economy’s long slide reflects Italian leaders’ failure to confront the country's loss of competitiveness, it is a failure that is widely shared in Europe.

The OMT programme was justified but the fiscal union question remainsBruegel
The monetary union, even with the OMT programme, is incomplete and the issue of fiscal union remains unresolved. To permanently stabilise monetary union, the EU will need to agree on a small fiscal union.

Global PMIs point to punch-drunk and confused economyTradingFloor
At first look, the flash August purchasing manager indices appear to provide some positive outlook for the global economy. That is exactly what scares me. The news is not really that encouraging, and instead acts as an excuse for policymakers to stand back and dream of better times.

Secular stagnation: Facts, causes, and cures – a new
Secular Stagnation: The BookKrugman / NYT
Six years after the Crisis and the recovery is still anaemic despite years of zero interest rates. Is ‘secular stagnation’ to blame? This column introduces an eBook that gathers the views of leading economists including Summers, Krugman, Gordon, Blanchard, Koo, Eichengreen, Caballero, Glaeser, and a dozen others. It is too early to tell whether secular stagnation is really secular, but if it is, current policy tools will be obsolete. Policymakers should start thinking about potential solutions.