The best articles from the
ending week. Last week’s ‘best’ here.
Previously on
MoreLiver’s:
EUROPE
Foreign Borrowing in the Euro Area Periphery: The End
Is Near – N.Y.
FED
Periphery countries have suffered painful contractions
weaning themselves from foreign borrowing. The hope now is that the restoration
of external balance in these countries will set the stage for meaningful
recoveries. The debt burden from past borrowing remains, however, and argues
for caution about the periphery outlook. Much will depend on the behavior of
external investors.
The Eurozone's FTT plan is vicious, unfair
and counter-productive – TradingFloor
Lars Seier
Christensen: The idea of transaction taxes is credited to the economist James
Tobin, who first suggested a currency transaction tax in the 1970s. But even
Tobin renounced the theory as unfeasible later in his career, a fact rarely
mentioned in the debate today.
The Commission
utterly fails to address flaws in the financial transaction tax – Open
Europe
"If you had kept quiet, you would have remained a
philosopher" -
Blogs review: Dealing with an impaired monetary
transmission mechanism – Bruegel
Dealing with the fragmentation of capital markets along
national borders and the resulting lack of funding for SMEs in the countries of
the periphery has been a central issue for the ECB for some time already. But
the prospect of a prolonged double-dip has rendered it even more urgent. In this
review, I document the extent to which the transmission mechanism of monetary
policy within the eurozone is broken and discuss several proposals – such as a
negative lending deposit rate and the creation of a new program targeted to
SMEs – designed to increase the flow of credit in the periphery.
“Built to
Last”: The New Euro Area Framework – ECB
Speech by Yves Mersch, Member of the Executive Board of the
ECB, Barclays Research Conference, London,
17 May 2013
Der Elefant im Raum – Free
exchange / The Economist
Higher inflation in Germany would alleviate substantial suffering around the
periphery at fairly minimal cost to Germans (for their suffering, as we've
seen, they get more holidays in Portugal and a nice Mediterranean real estate portfolio). Many
Germans might prefer not to accept that trade-off,
Helicopter money as a policy option – voxeu.org
With persistently weak economic conditions becoming the norm
in Europe, economists are considering increasingly
unconventional policy options. One tool that has yet to be taken out of storage
is ‘helicopter money’, i.e. the overt monetary financing of government
deficits. This column recounts a policy debate on helicopter money that was
held at LBS in April 2013 among three of the world’s leading monetary
economists.
The ECB can't
substitute for periphery financial reform – Free
exchange / The Economist
Huw Pill / Goldman Sachs: While there is certainly a risk in
doing nothing to support credit creation in the periphery, aggressive credit
easing policies do not appear to offer a good trade-off. Rather, more
structural policies supporting efforts to undertake the painful but necessary
re-booting of the peripheral financial system are to be preferred.
Can it be inflated away? – Buttonwood
/ The Economist
Marco Valli, the euro zone economist of Unicredit, the
Italian bank, has produced a very interesting 27-page note on the issue. To
give the game away, the title is "Inflating away the debt overhang? Not an
option". Mr Valli argues that a central bank trying to achieve this aim
would face three challenges
The ECB Should Act to Avert the Risk of Deflation in
the Euro Area – PIIE
When price stability is assured, there is no need to change
policy. When price stability is at risk, policy should be changed to fulfill
the mandate.
The Two Charts That Keep Draghi Up At Night
– ZH
From BNP: non-performing loans, interest rates on loans to
corporations
UNITED STATES
Confidence Boom? – Tim
Duy’s Fed Watch
ASIA
Japan Is Back: A Conversation With Shinzo Abe – Foreign
Affairs
Japan's
prime minister speaks openly about the mistakes he made in his first term, Abenomics,
Japan's wartime record
(and his own controversial statements on that history), and the bitter
Senkaku/Diaoyu Island dispute with China.
Assessing Abenomics
– alphaville
/ FT
There’s evidence that the JGB price rises are motivated by
positive factors — inflation rate expectations — and not just dumping
JGBs…there is a big element of timing here. And it’s too early to assess
Abenomics.
Why Japan? Because
That’s Where the Profits Were – WSJ
The problem is not that such markets are overvalued per se;
it’s that they become the go-to place to take profits when investors get
jittery.
Richard Koo Warns Of
"Beginning Of The End" For Japanese Economy – ZH
Everyone’s scared of
something – alphaville
/ FT
Nomura’s Richard Koo put out a note on Tuesday reacting to
the rise in JGB yields since the Bank of Japan went into QE overdrive that
seems worthy of some attention.
Elementary, My Dear
Watanabe-san – Krugman
/ NYT
So to the extent that this wasn’t just markets doing their
occasional panic thing, it looks like a sudden outbreak of concern about
whether the Bank of Japan has really changed as much as it seems.
The deeper agenda
behind 'Abenomics' – Reuters
Prime Minister Shinzo Abe is riding a wave of popularity,
spurred by voters' hopes that his prescription for fixing Japan's
economy will end two decades of stagnation. But interviews with some two dozen
allies and insiders show "Abenomics" was a late addition to his
platform.
Market turbulence
poses first serious test for Abenomics – Reuters
This week's turbulence in Tokyo
markets exposes a key risk of Prime Minister Shinzo Abe's all-in strategy to
revive Japan's
economy - if investor confidence falters, the government and the Bank of Japan
may be left with few options to turn the tide.
OTHER
Who Invented TBTF (Too Big to Fail)? – Minyanville
Aaron Brown: So TBTF is a myth. It is the monster under the
bed, the dragon on the edge of the map. We never had it, and we certainly do
not have it now.
The Rules, Part
XXXVIII – The
Aleph Blog
What errors do most money managers make today?