Longer thoughts on Europe, US and Asia.
Previously on MoreLiver’s:
EUROPE
Beppe
Grillo shocks Berlin and Brussels, Putin’s Eurasian Union ambitions,
and should bankers’ bonuses be capped?
The Euro’s House Divided – Project
Syndicate
The
European Commission’s latest economic outlook paints a disheartening picture of
a deep and persistent economic and social divide within the eurozone. Such a
gulf within a monetary union cannot be sustained for very long.
Disastrous Predictions and Predictable
Disasters – Krugman
/ NYT
As Jonathan
Portes points out, it is now more than two years since Olli Rehn declared that Europe’s recovery in the real economy has
taken hold and is becoming self-sustaining.
Winners of a European banking union – voxeu.org
So far,
discussions around Europe’s prospective banking union have focused only on the supervision of
banks. This column argues that policymakers must also think about the
resolution of banks in distress. While national governments confine themselves
to the domestic effects of a banking failure, a European Resolution Authority
could incorporate domestic and cross-border effects. A cost-benefit analysis of
a hypothetical resolution of the top 25 European banks shows that the UK, Spain, Sweden, and the Netherlands would be the main winners.
Austerity needed to start, now we need a fiscal
union – bruegel
The main
driver of public debt increases in the last 4 years has been high public
deficits, not austerity. Budget consolidation is necessary to avoid excessive
increases in debt levels. The central question is about the best moment to
pursue the adjustment. I provide a simple scenario analysis, which suggests
that fiscal adjustment should be gradual in order to balance risks. Arguably,
adjustment has been gradual in some though not all countries considered. The simulations suggest that significant
recessions are still ahead of us. This calls for a Marshall plan for Southern Europe and a more forceful use of
restructuring and resolution tools. Contracts could be a good way of providing
fiscal support in exchange for reforms.
Another look at Ricardian equivalence: the case
of the European Union
– voxeu.org
Can
European countries share their debts? This column argues that higher government
indebtedness means larger household net financial assets. Thus, any pooling of
European legacy debt would be considered unacceptable by countries with less
government debt unless it also involved the pooling of households’ financial
assets. Yet, this would be legally and technically insurmountable. The EU must
face forced Ricardian equivalence: the countries with the largest legacy-debt
burdens must reduce them by increasing the tax burden or, alternatively, reduce
their budget expenditure.
A new direction for euro-area macro policies – bruegel
In this
post I would like to assess the aggregate fiscal stance of the euro-area and
the rationale for reconsidering austerity policies in fiscally sound (‘North’)
and weak (‘South’) countries. I’ll also briefly discuss growth policies and
monetary policy issues.
The sad record of
fiscal austerity – FT
Martin Wolf: The ECB could have prevented the panic.
Tens of millions are now suffering unnecessarily
Bankia has
been the focal point of Spain’s banking crisis since requesting a
massive state bailout in mid-2012. Writedowns on rotten property assets led it
to post Spain’s biggest ever corporate loss for
2012. Today’s graphic looks at some of the biggest banking losses in Europe.
UK
Why talk of an implausible policy is welcome
Britain to oppose EU bank bonus rules – euobserver
Britain plans to oppose new EU bank bonus
rules when finance ministers meet in Brussels next week.
ITALY
The Five Star
Movement: The crickets come out – The
Economist
ITB: What now for the
euro? – BBC
(mp3)
Andrew Walker and his guests discuss the aftermath of
the Italian election. What does the inconclusive result mean for the future of
the eurozone? More integration or disintegration? And Colm O'Regan muses on
whether comedians make good politicians. What lessons can we draw from the
electoral success of a former comedian, Beppe Grillo? Perhaps all politicians
would benefit from being able to tell a good joke
UNITED STATES
FED
Want to Know What the Fed Is Reading? Read This – WSJ
Bernanke’s Credibility on ‘Too Big to Fail’ – Economix
/ NYT
Premature Fed
pullback could "short-circuit" recovery: Bernanke – Reuters
Bernanke said on Friday that pulling back on
aggressive policy measures too soon would pose a real risk of damaging a
still-fragile recovery.
The Past and Future
of Monetary Policy – FED
Chairman Ben S. Bernanke at the Annual
Monetary/Macroeconomics Conference:, sponsored by Federal Reserve Bank of San
Francisco, San Francisco, California – slides
(pdf)
Fifty Trades of Grey
– The
Big Picture
JPMorgan’s Michael Cembalest walks us through the
changes in his attitude toward the Fed, from the heady days of early 2009
SEQUESTER
If Not For That Pesky Sequester – Tim
Duy’s Fed Watch
Wonkbook: Everything you need to know for
today's sequester –
Wonkblog
/ WP
The US federal government has entered a
new controversial phase of deficit cutting today, as the automatic
across-the-board spending cuts begin slicing budgets.
The final sequester breakdown, from the Air
Force to Zoos – Wonkblog
/ WP
Now that
the sequester is in effect, the OMB has released its final account-by-account
cut numbers. It released a similar report in September that was soon rendered
out-of-date by the changes to the sequester passed as part of the fiscal cliff
deal.
Sequester, Day 1 – CFR
On the
question of how the evolving relationship between the US and China will influence the international
order, there are few individuals whose observations receive equal attention on
both sides of the Pacific. That is why the views of Singapore’s founding father, Lee Kuan Yew,
deserve careful consideration.
1) Deflationary forces have tightened their grip on the
world's third largest economy 2) The weekly portfolio flows that warn that the
old recycling problem may be back.