MoreLiver's Daily: 19th Sep

if the single currency gets stronger, then the eurozone’s economic recovery gets harder — and thus the measures that are taken, ostensibly, to shore the euro up run the risk of doing it damage by undermining its longer-term existence.

Deposit Flight From Europe Banks Eroding Common Currency – BB

First the Governance, Then the Guarantees – EconoMonitor

As long as supervisory power effectively remains in the hands of national supervisors, as in the governance structure currently proposed by the commission, risk-sharing through European deposit guarantee schemes or resolution funds is a dangerous and naive dream.

Why Spain Will Seek Help—and Why the ECB Retains Its Leverage – PIIE

First, recall that the ECB was more than willing in November 2011 to cut Prime Minister Silvio Berlusconi of Italy loose and deny him securities market program (SMP) support because of insufficient progress on reforms. Its action set a precedent for even large euro area member state governments. Second, unlike the case of Lehman Brothers and other systemic banks, large industrial countries do not go bankrupt overnight. Rather they run the risk of sliding into it over time.

Mariano Rajoy waiting for markets to force his hand – Sober Look

Clearly a number of political reasons are causing Rajoy to delay asking for ECB's assistance. Applying now however would give Spain time to negotiate the bailout conditions versus having to do it under duress. Sadly, critical decisions in the Eurozone seem to be made only under duress. And given the economic and fiscal trajectory of Spain, it is just a matter of time before market conditions will force Rajoy's hand.

Westerwelle's Future of Europe report - worth getting excited over? – Open Europe

Group of eleven European foreign ministers released its final report and conclusions, the broad thrust of which is that, to emerge from the crisis, Europe needs more economic and political integration.

The Five Key Differences Between The ECB's OMT And The Fed's QEternity – ZH

Morgan Stanley: Fed’s program already running, different instruments, ECB sterilized, conditionality, ECB violating its mandate.

USA

US: approaching the fiscal cliff – Danske Bank (pdf)

Seasons of the Bernanke – EconoMonitor

This is the third summer in a row that we have watched commodity specific sectors make a mid-summer bet that a Central Bank somewhere would intervene to attempt a “jump start” to the world economy.

Could QE3 Cause the Fed to Go Broke? – EconoMonitor

Don’t call it a target: Fed buys wiggle room with qualitative goals – MacroScope / Reuters

No Pretense – The Big Picture

Since 2007 our analysis has suggested the likelihood of economic outcomes that most have considered unlikely: significant and ongoing monetary inflation, policy-administered currency devaluation, substantial global price inflation, and an eventual change in how the forty year old global monetary system is structured.

The Fed’s Best Rationale for QE3 – BB

Hawks Are Marginalized – Tim Duy’s Fed Watch

Fed hawks are largely marginalized. Their views have not and will not have a significant impact on policy making. They will only appear to have an impact on policy if the data signals that a policy shift is needed. Given the current set of policymakers on the Fed, the hawks will only have a voice if Bernanke is replaced with one of their own. And that is when it would get interesting, as I am not sure that the moderates would follow a hawkish Chairman.

OTHER

EM Bond Snapshot - Sep 2012 – Danske Bank (pdf)

BoJ expands QE in slightly aggressive easing move – Danske Bank (pdf)

Commodity encumbrance and Joseph’s storage play – alphaville / FT

Financialised commodity inventory and the impact it has had on the supply and demand picture, by taking inventory off-market and off-balance sheet.

A Crude Message about the Market? – dshort

Oil price and S&P 500 have pretty much moved hand in hand.

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Wednesday, September 19

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