The best articles from the ending week. Last week’s ‘best’ here.
EUROPE
Special: ECB Watch – MoreLiver’s Daily
Margaret Thatcher: European. – A Fistful of Euros
So why isn’t this more
obvious? I think the answer is that the European Union has not turned out to be
the nice alternative to Thatcherism it was sold as in the 1990s. Ask a
Spaniard. No, go ahead.
German Poll Shows Merkel
Losing Majority – ZH
Given that the
mainstream parties have excluded a coalition with the Left party, such results
would allow only coalitions of Merkel's CDU/CSU with the SPD or the Greens.
This raises the question of whether Merkel becomes more hard-nosed in her
treatment of European bailouts
The great Spanish nation can
end its crucifixion at will by leaving EMU – The Telegraph
The course of events
demands a lifting of the taboo surrounding the dissolution of the euro zone. If
solidarity cannot be achieved through a progressive reform of Europe’s economic
institutions, then perhaps it is time to consider taking them apart. Perhaps
the only way to save the Union is to ditch the euro.
Spain Update: Running from
the Bulls? – Marc to Market
There have been three
recent developments in Spain: the new record high unemployment, the earnings
reports of several large banks, and the government's new fiscal forecasts and
strategy.
A European QE Disconnect to
Come? – PragCap
Japan’s Yen strategy
is inherently zero-sum. That is, if the
lower Yen boosts Japanese growth then it’s essentially stealing from someone
else’s growth. We’ve seen this most clearly in Europe in recent years where the
weak Euro has benefited Germany and not the periphery nations (who are all
current account deficit nations). So
it’s interesting to note that the decline in the Yen is hurting…Germany!
Research Bulletin No. 18 – ECB (pdf)
Heterogeneous transmission
mechanism and the credit channel in the euro area * Firms’ adjustment during
times of crisis * Macroeconomic effets of large-scale asset purchase programs
Insight: Why did Cypriot
banks keep buying Greek bonds?
– Reuters
Cypriots want to know
who decided to plough their savings into the doomed public accounts of their
bigger neighbor, Greece, and why. But answers are proving elusive, not helped
by the mysterious wiping of data at Bank of Cyprus.
UNITED STATES
Special:
FED Watch – MoreLiver’s
Daily
This Is What Passes For A
Good Earnings Season In The "New Normal" – ZH
While one can easily
game expectations and quiet cut forecasts the night before earnings just to
"allow" the company to beat them easier, one thing that can not be
fudged are trends in time, in either revenue or EPS.
ECONOMICS / MARKETS
Global austerity: a primer – The World / FT
Austerity appears to
be an increasingly dirty word in Europe. The past week alone has seen European
Commission President José Manuel Barroso, Bill Gross of Pimco and Italy’s new prime minister Enrico Letta calling for
an easing of austerity. Spain’s surpassing of the 6m unemployed mark on
Thursday added fuel to the debate. But even in Germany, the austerity police of
the eurozone, cracks are beginning to show ahead of the elections with the
emergence of an anti-euro party.
The era of austerity is over
(for now) – Wonkblog / WP
The era of austerity
began on February 5, 2010. That was when the finance ministers and central
bankers of the seven major industrialized powers flew to the remote Arctic
village of Iqaluit, Canada. That meeting of the Group of Seven came at a time
when the extraordinary financial rescues and fiscal and monetary stimulus of
the crisis seemed to have done their job and the world economy was on the mend.
Investment
Outlook May 2013: There Will Be Haircuts – PIMCO
Yet if there are no
spending cuts or asset price write-offs, then it’s hard to see how deficits and
outstanding debt as a percentage of GDP can ever be reduced…These haircuts are
hidden forms of taxes that reduce an investor’s purchasing power as manipulated
interest rates lag inflation. In the process, governments and their central
banks theoretically reduce real debt levels as well as the excessive
liabilities of levered corporations and households. But they represent a hidden
wealth transfer that belies the vaunted phrase “good as money.”
Monetary stimulus vs
financial stability is a false trade-off – Worthwhile
There's an idea
floating around out there that I fear may be influential. And that idea is
horribly wrong. Which makes it dangerous. And I want to try to kill it. But
macro is hard. And it's not easy to explain clearly and simply. I can only try.
Austerity is not the only
answer to a debt problem – FT
Policy makers must use
all the tools available, write Kenneth Rogoff and Carmen Reinhart (short
summary here)
Undoing central bank balance
sheet expansions – Fatasmihov
While it might not be
an example for all advanced economies it is useful to point out that some
central banks, such as Japan and Sweden have seen large declines in the size of their
balance sheet in recent episodes (Japan in the mid-2000a, Sweden in the Fall of 2010) without any disturbance
to the financial sector or interest rates.
Weekend Developments: Signal
and Noise – Marc to Market
Five talking points:
1) leaked French Socialist draft document that was critical of Germany and the
UK 2) Bundesbank's letter to the German Constitutional Court objecting to the
ECB's Outright Market Transactions – no news or influence, 3) The Iceland
election 4) Formation of a new Italian government 5) An Austrian weekly claims
that national central bank estimates that to wind down a nationalized bank by
the end of this year as the EU is demanding would cost the government 14 bln
euros or ~4.5% of GDP.
Investors earn handsome
paychecks by handling Buffett's business – Omaha
Interviews of people
working for ‘The Sage’.
FINNISH
EU puuhaa jo liittovaltiota – Suomi seuraa tuppisuuna – Jan
Hurri / TalSa
Kriisi ei pääty eikä euro pelastu ennen kuin
euromaat muuttavat rahaliittonsa liittovaltioksi. Tätä "Bryssel" ja
"markkinat" hokevat vuoron perään. Ne hyötyisivät tulonsiirto- ja
velkaunionista – mutta eivät osallistuisi kustannuksiin. Suomi taas kuuluisi
maksajiin – mutta seuraa tuppisuuna sivusta.
Vappupuhe
– MoreLiver’s
Daily
Dramaattinen käänne uusissa asuntolainoissa – TE
Uusien asuntolainojen määrä on kääntynyt
reippaaseen laskuun, paljastaa OP-Pohjolan maanantaina julkistama
osavuosikatsaus.
Suomalaisen työn hinnan loppusuora – Pauli
Vahtera / IL Blogit
Joko Saksa sai eurokriisistä tarpeekseen? – Jan
Hurri / TalSa
Saksa alkaa saada tarpeekseen kriisitoimien
yhä suuremmista riskeistä ja kustannuksista. Tämä voi enteillä kriisin uutta
kärjistymistä tai äärimmillään jopa nykyeuron loppua. Mitan täyttyminen on
syytä ottaa vakavasti, sillä saksalaisen eurokritiikin uusi aalto on lähtöisin
virallisen Saksan ytimestä.
Kattamattomat vastuut Euroopassa – Henri
Myllyniemi / Piksu
Näin vapunpäivänä lienee hyvä kirjoittaa
muutama sananen aina yhtä takuupiristävällä tavallani. Kun me eurooppalaiset
kansat täydessä harmoniassa olemme päättäneet liittovaltioitua ja keskittää
talouspolitiikan Brysselin erehtymättömille henkilöille, niin voisi olla ihan
hyvä katsastella yhteisvastuusta aiheutuvia numeraaleja.
Pohjoismaisen hyvinvointimallin hintalappu Euroopan
tasolla – Henri
Myllyniemi / US Puheenvuoro
Suomella on sangen poikkeuksellinen asema
eurovaltioiden saralla. Suomella on toki julkista velkaa (valtio ja kunnat),
mutta valtiovelan määrä on pienempi kuin Suomen tekemien sijoitustn määrä.
Suomen nettopositio on velan suhteen negatiivinen. Voimme jonkinlaisella
varmuudella sanoa, että tämä nykyinenkin kriisi päättyy joskus ja
taloustilanteessa koittaa paremmat ajat.