Previously on MoreLiver’s:
Roundups &
Commentary
News – Between
The Hedges
Markets – Between
The Hedges
Recap – Global
Macro Trading
The Closer – alphaville / FT
Europe: Stocks Plunge To Seven-Month Lows; Banks In
Bear Market – ZH
US: Stocks Tumble And
Bonds Grumble Despite Dovish Hawks – ZH
EUROPE
Bankers Caught On Tape, Joking About Bailout,
And How They'd Never Pay It Back
– BI
The CDU/CSU election manifesto: Something for
everyone – DB
Research
BANKING
UNION
EU bank bailout rules: leaked Noonan compromise – Brussels
blog / FT
The main issue in
dispute can be summed up in one word: flexibility. How much of it should
national authorities be allowed under the EU’s new banking union regime when a
bank fails? Should losses be nearly automatic on bank owners and bond holders –
and, potentially, some deposit holders – or should national authorities be
given discretion in the distribution of losses?
To be optimistic,
therefore, is to conclude that European leaders understand the math, and in
order to protect the euro would expand the fund when (and only when) needed–an
unwritten commitment to do whatever it takes. But the desire of Germany and others to put off that day as long as
possible, to exhaust all the other options, hardens their line when it comes to
bail-ins. That makes this week’s showdown important.
EU ministers seek resolution on who pays if
banks fail – Reuters
EU finance ministers
are under pressure to agree who pays for failing banks after failing to reach a
deal last week, with Germany and France at odds on how to distribute the costs.
UNITED STATES
Housing Stocks Near Bear Market; Turn Red
Year-To-Date – ZH
FEDERAL
RESERVE
The Fed’s bad timing – Felix
Salmon / Reuters
If you only read one
article on US monetary policy and the latest actions of the Fed, it should be
Wonkblog’s interview with St Louis Fed president James Bullard — an interview
that answers pretty much every question you might have, with the exception of the
“why did they do this” one.
"Bad News Is No Longer Good News" – ZH
Morgan Stanley: we
think the Hall Pass is over and that this regime changed last week. The big outcome from
the earlier-than-expected start of tapering is that going forward, bad economic
news will be bad for markets. The market knows and most Fed governors know
there are diminishing returns to QE’s efficacy. So, something new and massive
would be required in order for poor economic news – should it surface – to be
rewarded the way it has been for much of the past year.
What if the Fed Really Does Think it’s
Monetizing the Debt? – PragCap
So, what if the entity
running the program actually believes it’s needed to fund the deficit and plans
on removing this huge psychological put from underneath the market based on
what I think is a misconception? The
falling deficit and the removal of the Bernanke Put….Talk about a potential
double whammy….
Fed Needs Threshold System for Bond Buying
Program, Kocherlakota Says – WSJ
The Fed needs to
clarify the conditions that would lead it to pull back on the level of stimulus
it is now providing the economy, a U.S. central bank official says.
"We are not tightening", says a
tightening Fed – Free
exchange / The Economist
The past few days have
made it overwhelmingly clear that the Fed is steering this recovery. That
should be comforting; all it has to do is steer things in a more expansionary
direction! But it isn't, because the Fed keeps looking around and wondering, who's
got the wheel?
Neither cast ye your tapering before swine… - alphaville
/ FT
Fisher is a long-time
hawk and it’s difficult to know how representative these comments are — in
other words, to what extent he is speaking for others on the FOMC in declaring
that the intent behind announcing the strategy last week was to begin sussing out
the market’s vulnerabilities, preparing them for the inevitable tapering when
it does occur. Maybe we’ll learn more in the minutes.
Fed’s Fisher: Fully in Favor of Dialing Back
Bond Purchases – WSJ
ASIA
JAPAN
Japanese Prime
Minister Shinzo Abe’s economic plan seemed to sail off almost flawlessly this
year as stocks soared and the yen tumbled from levels late last year. But has Japan really turned a corner?
But the main potential
effect of Abenomics on Europe lies elsewhere. If PM Abe decides after all to
adopt ambitious growth-enhancing measures and Abenomics proves successful, the
most important implication for Europe will be
that reviving the economy requires a combination of bold macroeconomic and
structural policies, with the right sequencing between the two.
CHINA
China cash squeeze eases, but bank shares take
big hit – Reuters
China's cash crunch eased further on Monday after the central bank moved to
prevent the money market from seizing up, but bank stocks tanked as the
authorities made clear that the days of unlimited cheap official funds are
over.
China’s worst cash
squeeze in at least a decade may weigh on smaller banks’ financial strength as
their reliance on interbank funding leads to an erosion of loan margins,
according to Moody’s Investors Service.
China said there’s a reasonable amount of liquidity in the financial system
and urged banks to control risks from credit expansion, signaling no relief for
a cash squeeze that risks exacerbating an economic slowdown.
When it comes to the latest PBoC policy, Mr.
Mobius knows best – Sober
Look
The PBoC acted to calm
China's interbank markets this morning, somewhat
stabilizing liquidity and short-term rates. Mobius: “While China's housing market problems are similar in scale
to those faced during the U.S. subprime mortgage bubble and its banks are
rife with bad loans, it won't lead to another Lehman-style crash”.
BIS ANNUAL REPORT
Okay, we get it, BIS: fiscal policy is not your
thing – alphaville
/ FT
Sure, the BIS
arguments about the limitations of monetary policy are fair and perhaps even
timely. But most of us are living in less than ideal situations when it comes
to fiscal policy, particularly with regard to the long-term. The other problem
is with the BIS prescriptions. Everyone can’t repair their balance sheets at
the same time without hurting aggregate demand.
More on the BIS Annual Report – Historinhas
I wonder how the steep
drop in NGDP at about the same time in a large swath of developed economies can
be said NOT to be a monetary problem.
Why financial stability is a necessary
prerequisite for an effective monetary policy – BIS (pdf)
Remarks by Mr William
C Dudley, President and Chief Executive Officer of the Federal Reserve Bank of
New York and Chairman of the Committee on the Global Financial System (CGFS),
at the Andrew Crockett Memorial Lecture, Bank for International Settlements
2013 Annual General Meeting, Basel, 23 June 2013.
OTHER
Greatest. Research Note. Ever. – The
Reformed Broker
Nothing else to say
and saying it.
EM sell-off: where are the bottom-fishers? – beyondbrics
/ FT
FINNISH
Suomen vienti sukeltaa – tyhmyri
Kannattaa
varautua sisäiseen devalvaatioon eli tuntuvaan köyhtymiseen
Suomi sukeltaa sisäiseen devalvaatioon – Petri
Rautiainen / US Puheenvuoro
Saatanan tunarit ! – Pekka
Korpela / US Puheenvuoro