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Saturday, October 4

4th Oct - W/E: Linkfest

Previously on MoreLiver’s:

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Bailed out Austrian Volksbanken to wind itself downFT

The Merkel Effect: What Today's Germany Owes to Its Once-Communist EastSpiegel
East Germany ceased to exist following the 1989 revolution and the fall of the Berlin Wall. But did the former communist country help shape today's Germany? The answer is yes, and Chancellor Merkel is a big reason why.

Finnish Prime Minister 'Moscow Is Provoking a Number of Its Neighbors'Spiegel
In an interview, Finnish Prime Minister Alexander Stubb, 46, discusses relations with neighboring Russia and his country's flirtation with NATO. He says Finland will make a decision "without asking for permission."

Sweden: The new red-green government takes officeNordea
This morning Sweden’s new Prime Minister Stefan Löfven announced his new government. The Social Democrats and the Green Party has formed a minority government (40% of the mandates in the Riksdag) which will rely on jumping majority in the parliament.

Eurozone - Heading towards Animal FarmMerkelnomics

The 'dos and don'ts' of a growth-friendly policy mix for the Euro areaBruegel

Austerity Tales: the Netherlands and ItalyBruegel

Austerity has been an utter disaster for the eurozoneThe Guardian
All of the suffering in Europe – inflicted in the service of a man-made artifice, the euro – is even more tragic for being unnecessary, writes Joseph Stiglitz

The ECB’s Leap into the UnknownProject Syndicate
Jürgen Stark: The ECB’s decision to double down on monetary stimulus should be regarded as an act of desperation. Indeed, despite the central bank's aggressive approach, monetary policy in the absence of structural economic reform risks being ineffective.

Solving Europe’s Credibility ProblemProject Syndicate
Jean Pisani-Ferry: As the eurozone debates how to escape the stagnation trap in which it finds itself, one question has become increasingly important: Can governments credibly commit to trim public spending in the future while avoiding immediate cuts? Fortunately, the answer is yes: Fiscal accommodation now does not rule out consolidation later.

Interactive: Do it yourself European Unemployment InsuranceBruegel
Following on from our previous blog post on this topic, we invite you to try out our improved European Unemployment Insurance (EUI) scheme simulator which now includes a line graph to chart the evolution of the net flows from the scheme and its situation, as well as a heat map of all European countries.

Austerity has been an utter disaster for the eurozoneThe Guardian
All of the suffering in Europe – inflicted in the service of a man-made artifice, the euro – is even more tragic for being unnecessary, writes Joseph Stiglitz

The 'dos and don'ts' of a growth-friendly policy mix for the Euro areaBruegel
Combining monetary, fiscal and structural measures at the union level and at the national level

Why Europe's Doomsayers Are Right, In One ChartZH

How Russia’s Debt and Currency Markets Could Spiral into CrisisWSJ

Russia’s economy on the edge of recessionThe Economist

Russian Dissident Opens New Chapter in His Anti-Putin MovementNYT
Mikhail Khodorkovsky, Ex-Oil Tycoon, Plans to Lead Political Movement

Putin Rules Out Capital Controls As Ruble Hits Record Lows, "Curbs Risk" By Shifting To Non-Dollar SettlementsZH

Bridge to Nowhere Are EU Subsidies for Andalusia Well Spent?Spiegel
No other region in Spain receives as much European Union funding as Andalusia. But do the projects being funded make sense? Questions are mounting about the efficacy of the subsidies -- and about their potential for feeding corruption.

Matteo Renzi says Berlin has no right to lecture its partnersFT
Italy’s prime minister has appealed to Brussels and Berlin to be more understanding to countries with no growth and high unemployment as they struggle to comply with the EU’s rules on public finances.

Transcript: interview with Italy’s premierFT
Matteo Renzi speaks in London to the Financial Times

The Caliphate Next Door Turkey Faces Up to its Islamic State ProblemSpiegel
For years, Ankara has been tolerating the rise of the extremist Islamic State. But now that the jihadists are conquering regions just across the border in northern Syria, concern is growing that Islamist terror could threaten Turkey too.

Economic reform in Europe: The rise of the VallenziThe Economist
The leaders of France and Italy have a window to pursue genuine reforms, but it is only a narrow one

France: The last VallsThe Economist
Manuel Valls heads the most reformist government France has seen for many years. But might the beneficiaries be Nicolas Sarkozy and Marine Le Pen?

Greece Will Be In Default Within 15 Months, S&P WarnsZH

Draghi’s Challenge Underlined as Noyer Joins Opposition to ABSBB
“It shows there’s not just an issue of policy effectiveness, but an issue of policy willingness,” said Mohamed El-Erian, an economic adviser to Allianz SE and a Bloomberg columnist. “The market has been reasurred by the notion that the ECB is willing to do whatever it takes, but if there’s now a willingess issue that’s a completely different outlook.”

Markets and the German Court’s decision on
In February 2014, the German Federal Constitutional Court declared the Outright Monetary Transactions (OMT) programme to be inconsistent with EU law. However, this did not have a negative impact on the OMT and sovereign risk premia continued to decline. This column argues that the benign response of financial markets may be due to an expectation of a likely compromise between the European and German Courts.

The Astonishing Story of the Federal Reserve on 9-11Daily Kos

On "Asian Values"Noahpinion
There’s a strain of thinking called “Asian Values,” which basically says that human rights and democracy are things that the West either A) needs or B) is capable of handling, but which does not suit East Asian countries…. This idea is absurd, offensive, and obviously wrong. Studies show that Asian values place just as much weight on freedom and rights and democracy as Western values.

Hong Kong protests: The Party v the peopleThe Economist

HK democracy activists come under attackFT
Triads suspected as students face violence from ‘thugs’

Q&A on the political turmoil in Hong KongNordea
Update on the crisis and the implications for the Chinese and Hong Kong economies and the potential risks on the CNY/CNH.

EURUSD: Will the Fed bail out the ECB? (& can the Riksbank teach us anything?)Nordea
Martin Enlund                     | Disclaimer
ECB QE is all about inflation. The only way to bring about a near-term boost to inflation is via a weaker currency. If the ECB can buy itself enough time, the Fed may eventually bail out the ECB via a stronger USD. Recently however, weaker US sentiment and dropping oil prices suggest that the odds may have been moving away from this no-QE scenario, despite the ECB’s disappointing October meeting.

Risky Asset Outflows Surge Again As "Up-In-Quality" Rotation AcceleratesZH

*The Power of Back Testing Investment StrategiesJim O'Shaughnessy

8 Things To Learn From Japan’s Biggest Day TraderZor Trades

European Stocks: Further downside aheadTradingFloor

Markets’ Rational ComplacencyProject Syndicate
Nouriel Roubini: A century ago, financial markets priced in a very low probability that a major conflict would occur, blissfully ignoring the risks that led to World War I until late in the summer of 1914. Back then, markets were poor at correctly pricing low-probability, high-impact tail risks; they still are.

FX trading styles: Different strokes for different folksTradingFloor

Why cross asset analysis is importantTradingFloor
Understanding that assets within and between asset classes see shifting correlation from time to time is crucial for success as a trader and investor.

Why macro mattersTradingFloor
As the third quarter comes to a close, asset managers find themselves questioning the relationship between portfolio performance and macroeconomic conditions. Here, I provide a breakdown of the various risk factors and how they affect returns.

The belated Michael Lewis effect?FT
The five and a half months since this book was published have not been an easy one for the high frequency trading community, certainly in the US
Notes From Charlie Munger's Daily Journal Meeting 2014Market Folly
The 102 Finance People You Have To Follow On TwitterBI
The Devil’s Financial DictionaryJason Zweig

Private Sector Consumption and Government Consumption and Debt in Advanced EconomiesIMF
The propensity to consume out of income varies in a non-linear fashion with fiscal variables, and in particular with government debt per capita.

The distribution of wealth and the MPC – implications of new European dataECB
Aggregate consumption resp onse ranges b etween 0.1 and 0.4 and is stronger (i) in economies with large wealth inequality, where a larger proportion of households has little wealth, (ii) under larger transitory income shocks and (iii) when we consider households only using liquid assets (rather than net wealth) to smooth consumption

Cross-country differences in perceptions of
Income inequality is high in the US, but the support of social welfare programmes is low. In Europe, income inequality is low and the welfare states are generous. This column argues that this paradox is largely due to perceived inequality. Many Europeans believe that there is high inequality in their countries, justifying the need for redistributive policies. Americans, however, are less concerned with income differences and with respective redistributive state intervention.

It all makes sense when you realise there are TWO US dollar currenciesFT
The fact of the matter is that there is a parallel dollar-based financial system – call it the “Global Dollar system” – that operates outside the United States. As we have explained before, that parallel dollar market is actually the same old eurodollar market that has been befuddling academics such as Milton Friedman for decades.

How much longer can the global trading system last?mpettis
The current system, in other words, is inherently unstable and will sooner or later force the US economy into a position of choosing either to take on excessive risk or to abdicate its role as shock absorber.

The Geneva Report on global
The world has not yet begun to deleverage its crisis-linked borrowing. Global debt-to-GDP is breaking new highs in ways that hinder recovery in mature economies and threaten new crisis in emerging nations – especially China. This column introduces the latest Geneva Report on the World Economy. It argues that the policy path to less volatile debt dynamics is a narrow one, and it is already clear that developed economies must expect prolonged low growth or another crisis along the way.

Debt hysteriaCoppola Comment
I have been reading the Geneva 16 report, it's scary stuff. I found myself wondering why there was no discussion of the other side of all this. Who are the owners of all this debt?

Exchange Rate Movements and the Australian EconomyRBA
A temporary 10 per cent appreciation of the real exchange rate that is unrelated to the terms of trade or interest rate differentials lowers the level of real GDP over the subsequent one-to-two years by 0.3 per cent and year-ended inflation by 0.3 percentage points.

Global disinflationary pressuresFT
Among the main arguments for central bankers and other policymakers in developed regions to risk an inflationary overshoot as they strain to close their output gaps is the historical evidence that a central bank can credibly reduce inflation that has become unmoored. The reverse isn’t true: whether because of unwillingness or impotence, policymakers have struggled to spur growth, and to push inflation sustainably back up to target, with rates at zero.

Negative rates, in contextFT
The impact on the real deposit rate resulting from changes in the nominal rate set by the ECB have been dwarfed by changes in the real deposit rate caused by changes in inflation since the crisis. This is important, because the confusion about real and nominal rates also happened to be a contributing factor to the Fed’s failure to more aggressively fight deflation during the Great Depression.

Reconstructing Macroeconomic Theory to Manage Economic PolicyNBER
Joseph E. Stiglitz:  The paper argues that any theory of deep downturns has to answer these questions: What is the source of the disturbances? Why do seemingly small shocks have such large effects? Why do deep downturns last so long? Why is there such persistence, when we have the same human, physical, and natural resources today as we had before the crisis?

The hidden cost of freezing Russia outFT
Instead of having one major cross-border payments system there could eventually be many

Why is Thomas Piketty's 700-page book a bestseller?The Guardian
Thomas Piketty is a French economist whose Capital in the Twenty-First Century has swept American discourse. Four experts – Brad DeLong, Tyler Cowen, Stephanie Kelton and Emanuel Derman – take on why that is

Global Financial Stability ReportIMF
Risk Taking, Liquidity, and Shadow Banking: Curbing Excess While Promoting Growth - Analytical Chapters

The Growth of Shadow BankingiMFdirect
Shadow banking has grown by leaps and bounds around the world in the last decade.  It is now worth over $70 trillion. We take a closer look at what has driven this growth to help countries figure out what policies to use to minimize the risks involved.

Shadow banking defined, again and againFT

Have we done enough to regulate finance?World Economic Forum
Simon Johnson: The first view is that “we have done a lot” since the global financial crisis erupted in 2008. The second view is that we are a long way from completing the far-reaching changes that we need. Much of what divides the two sides in this debate comes down to this: Is it acceptable to say that banks “hold” capital?

Global Central Banking in 2014, a Third Quarter Update for 25 EconomiesWSJ
The cross-currents of the global economy leave the world’s central banks confronting varied policy choices in the months ahead. The U.S. and U.K. recoveries finally have enough momentum for the Fed and BoE to anticipate raising raise short-term interest rates from record lows next year. The ECB and BoJ see still weak growth and inflation prompting calls for them to provide more stimulus. Several emerging-market central banks are struggling with the twin challenges of slowing growth and high inflation. And the central banks in China and South Africa may get new leaders soon.

Thinking the unthinkable: The effects of a money-financed fiscal
The time may have come to leave old prejudices behind and come to terms with the urgent need to increase aggregate demand in a more foolproof way than tried up to now, especially in the Eurozone. The option of a money-financed fiscal stimulus should be considered seriously.

Helicopter money: Today’s best policy
High debt and deflation have afflicted Japan, the Eurozone, and the US. However, the monetary and fiscal policies implemented so far have been disappointing. This column discusses the importance of helicopter money in the form of overt monetary financing in addressing these problems. Overt money financing is the policy with the highest impact in raising demand and output without increasing public debt and interest rates.

WipeoutThe Economist
Debt forgiveness, and the redesign of debt contracts to involve more risk-sharing, is the answer to the problem of recurrent financial crises.

Follow or Break the Rule?Greg Mankiw
If you believe [Taylor rule] was reasonably good during the period of the Great Moderation, does this mean the Fed should start tightening now, as the economy gets back to normal? Maybe, but not necessarily. There are two problems with interpreting such rules today.

Now Is a Good Time to Invest in InfrastructureiMFdirect
There has been a decline in the overall quality of infrastructure in the United States and Germany. In many emerging market and developing economies, the expansion of the backbone has not kept pace with the broader economy, and this is stunting the ability of these economies to grow.

The IMF on InfrastructureGreg Mankiw

It’s Time to Build Roads to Prosperity, Literally, IMF SaysWSJ
Infrastructure investment is the antidote to serial disappointments in global growth, according to IMF

Concrete benefitsThe Economist
Public investments in infrastructure do the most good at times like the present

Wealth without workers, workers without wealth The Economist
The digital revolution is bringing sweeping change to labour markets in both rich and poor worlds

The third great waveThe Economist
The first two industrial revolutions inflicted plenty of pain but ultimately benefited everyone. The digital one may prove far more divisive

Productivity: Technology isn’t workingThe Economist
The digital revolution has yet to fulfil its promise of higher productivity and better jobs

The privileged few: Labour is steadily losing out to capital The Economist

Housing: Home economicsThe Economist
Sky-high house prices in the most desirable cities are holding back growth and jobs

Emerging economies: Arrested developmentThe Economist
The model of development through industrialisation is on its way out

New opportunities: Silver liningThe Economist
How the digital revolution can help some of the workers it displaces

Easing the transition: Means and endsThe Economist
How governments can deal with the labour imbalance

Revisiting the Lehman Brothers Bailout That Never WasNYT
Why, given all that happened, was Lehman the only bank that was not too big to fail? For the first time, Fed officials have offered an account that differs significantly from the versions that, for many, have hardened into history.

They let it happenThe Economist
The argument that American officials lacked the capability or authority to save Lehman Brothers – and, potentially, to spare the world the most wrenching financial crisis since the 1930s – never really withstood close scrutiny.

It’s silly to be frightened of being deadThe Guardian
At the age of 96, the legendary editor Diana Athill writes, the idea of death has never been less alarming. The process of dying is another matter

31 Pieces Of Advice For Surviving Your First Year On Wall StreetBI

We’ve killed off half the world’s animals since 1970WaPo

The Ten Golden Rules of ArgumentFarnam Street

36 Hours in CopenhagenNYT

Only in JapanMedium
10 Unusual and offbeat experiences from Japan.

When a Simple Rule of Thumb Beats a Fancy AlgorithmHBR

How AIDS first spreadThe Economist

Why a leading professor of new media just banned technology use in classWaPo

The Internet Is Broken, and Shellshock Is Just the Start of Our WoesWired
Somewhere along the way, in about 1992, one engineer typed a bug into the code. Last week, more then twenty years later, security researchers finally noticed this flaw in Fox’s ancient program. They called it Shellshock, and they warned it could allow hackers to wreak havoc on the modern internet.

What Happens When We All Live to 100?The Atlantic
If life-expectancy trends continue, that future may be near, transforming society in surprising and far-reaching ways.

How Gangs Took Over PrisonsThe Atlantic
Originally formed for self-protection, prison gangs have become the unlikely custodians of order behind bars—and of crime on the streets.

New York Literally Invented NightlifeThe Atlantic
The way we go out today started in the 1920s in The Big Apple

Miten pelastaa hyvinvointiyhteiskunnan rippeet?Jukka Hankamäki

Kokoomuspoliitikolta kova viesti: Palkanalennukset jäävät ainoaksi vaihtoehdoksi - maksumiesten joukko "mahdollisimman laajaksi"TE

Suomalaisten palkkoja leikattava ja työttömyyttä lisättävä - tässäkö kokoomuksen uusi vaaliteemaTyhmyri

Suomi: Teollisuuden suunta ei muutuNordea
Odotamme Suomen tavaraviennin ja teollisuuden uusien tilausten lisääntyneen elokuussa pari prosenttia vuodentakaisesta. Sellaiset kasvuluvut eivät riitä muuttamaan käsitystämme teollisuuden suunnasta puoleen tai toiseen.