EUROPE
Should German workers
be paid more? Or, Do we have an omitted variable bias? – Money
Matters
Today's Eurozone operates in a way that is momentarily advantageous for
capital-owners in the surplus countries and creditors at large, but damaging
for workers and entrepreneurs, debtors of all types and most users of public
services. This column argues that this is unsustainable. The Eurozone must be reformed
to avoid the risk that the EU itself could be destroyed by political conflict
among the winners and losers. 2014 is a window of opportunity for seriously
re-considering the Eurozone's functioning and for moving away from the 'Maastricht orthodoxy'. To
recover from stagnation and regain citizens’ trust, Europe needs a genuine
paradigm shift on the Eurozone.
And
finally...Merkel's third term in office – Merkelnomics
Lack Of Cash Flows
Ends Greek Export "Miracle" – ZH
BANKING
UNION
Dutch revolt over
bank rules: Dijsselbloem vs Borg Round II – Brussels
blog / FT
Wolfgang Schäuble’s
Letter on Backstops for the SRM – WSJ
Upon popular demand, we are publishing in its entirety the German
finance minister's letter on how far his country is willing to fund a new
system for winding down sick banks in the euro zone.
European banking
sector: Finally heading for better times? – DB
Research
Following years of struggle and having seen their world turned upside
down, European banks may finally be heading for a (somewhat) smoother ride in
2014. Profitability is returning, though so far this is mainly driven by lower
extraordinary charges rather than improvements in revenues and costs. Pressure
to build capital may lessen thanks to significant progress over the past two
years, yet currently banks are still shrinking relentlessly. Much will also
depend on regulatory and supervisory actions, especially on how the EU Banking
Union is implemented.
EUROPEAN CENTRAL BANK
Draghi: Hearing at
the European Parliament – ECB
ECB board member quits to take deputy minister post in German govt – Reuters
Draghi Ally Asmussen to Leave ECB for German Government – BB
Another German departure – The Economist
PURCHASING MANAGER INDICES
Eurozone Flash Composite PMI – Markit
Germany Flash Composite PMI –
Markit
France Flash Composite PMI –
Markit
Euro zone business recovery ends year on a high – Reuters
UNITED STATES
FEDERAL RESERVE
FOMC Projections
Preview: To Taper, or Not to Taper – Calculated
Risk
Clearly the data is broadly consistent with the September FOMC
projections, so a small taper should not be a surprise (even if most analysts
think the FOMC will wait until early 2014).
FOMC Meeting
Something of a Nailbiter – Tim
Duy’s Fed Watch
Unless you are living in a cave, you shouldn't be surprised if the Fed
decides to taper this week. At the same
time, you shouldn't be surprised if they do not taper. Even if they don't at this meeting, they soon
will.
Fed Taper Message
Succeeds With Bonds Adjusting to Economic Data – BB
After misleading investors with a time line for tapering its
unprecedented stimulus, the Federal Reserve now is stressing that any reduction
in bond purchases will depend on the economic outlook -- and the message is
sinking in.
Focus firmly on
Bernanke’s penultimate FOMC meeting Wednesday – TradingFloor
This week’s FOMC
meeting will be the year’s final major US event risk ahead of the New Year. There should
be plenty of volatility potential considering the divided opinions on what the
Fed will say on Wednesday.
Central Station:
Taper time? Close call for Fed – WSJ
Ask the Economists:
Should the Fed Taper in December? – WSJ
Market participants are on edge about whether Fed officials will start
reducing, or tapering, their $85 billion in monthly bond purchases, a program
known as quantitative easing or QE.
Bernanke Defends
Transparency Push – WSJ
Fed Chairman Bernanke defended a push for greater central bank
transparency during his tenure, arguing it is essential for public acceptance
of Fed policies and can help ease financial conditions with interest rates at
zero.
Industrial Production Surges Due To Cold Weather Boost For Utility
Demand – ZH
Industrial Production increased 1.1% in November, Above Pre-recession
Peak – Calculated
Risk
ASIA
Japan: Tankan business
sentiment suggests recovery – Danske
Bank
Japan business mood hits
six-year high as 'Abenomics' takes hold – Reuters
BOJ Beat: Five Takeaways From Tankan – WSJ
China: HSBC PMI falls in December, but details resilient – Danske
Bank
Economists React: Is China’s Manufacturing Sector Losing Steam? – WSJ
China: Flash PMI gives
early warnings of slowdown – Nordea
China Flash PMI: not
always on the money – beyondbrics
/ FT
OTHER
FX Forecast Update December – Danske
Bank
ECB deposit cut to weigh on EUR in 2014
Your FX year that was – alphaville
/ FT
Some annotated charts courtesy of HSBC
Party like it’s 1999 – alphaville
/ FT
Lombard Street ‘s Dario Perkins released
research entitled “Party like it’s 1999″
Recent research shows that capital requirements are only loosely related
to a market measure of bank portfolio risk. Changes introduced under Basel II
meant that banks with the riskiest portfolios were particularly likely to hold
insufficient capital. Banks that relied on government support during the crisis
appeared to be well-capitalised beforehand, suggesting they engaged in capital
arbitrage. Until the regulatory concept of risk better reflects actual risk,
the proposed increases in risk-weighted capital requirements under Basel III
will have little effect.
FINNISH
Velka kasvaa ja hallinto paisuu – Talouden
Tulkki
Julkisen puolen säästöt eivät tuhonneet USA:n
taloutta mutta tekivät hallaa Euroalueelle – Tyhmyri
Ongelma on
se ettei Euroalueen rahapolitiikka ole kasvuhakuista
EKP:n inflaatiotavoite ja nollakorkorajoite – HSE
Onko suomalainen asuntokupla puhkeamassa –
tule deflaatio, tule
– Tyhmyri