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EUROPE
Brussels blog round
up 14 – 20 December – Europp
/ LSE
Banking union, EU downgrade, and can Renzi change Italian politics?
The Eurozone, Germany
and the ECB’s interest rates – Credit
Writedowns
Solving Germany’s investment problem requires both low interest rates
and increased government investment. The ECB is at least attempting to address
the first of these. But when is the German government going to accept its
responsibility for the second?
The Eurozone’s
“Democratic Deficit”: A Reading List for the Perplexed – Craig
Willy
This post provides a reading list of major authors, with summaries, on
the origins and nature of the lack of demoracy in the eurozone.
Is corruption holding
back convergence? – DB
Research
European Leaders Say
‘No’ to More German Bondage – WSJ
EU leaders on Thursday evening watered down a German plan that would
have required governments to sign "binding" contracts committing them
to policy overhauls.
Banking union: ECB
independence at risk? – voxeu.org
The literature has overlooked the distributional effects of the tradeoff
between monetary and financial stability. In a political economy framework,
heterogeneity in voters’ portfolios can cause the degree of central bank
independence to differ from the social optimum.
German Finance Minister Wolfgang Schäuble has negotiated a European
banking union suited perfectly to his country's tastes. It looks like a
victory, but it could prove to be very expensive if Europe or Germany face another
financial crisis.
€ liquidity is
getting more valuable: what can be done about it? – Money
Matters
Should the tensions on the money market prove not to depend just on the
reinforced end of year effect and should the ECB want to buttress with facts
its forward guidance, It would have two fairly effective and not too costly
tools to use: stopping the absorption of liquidity injected through the SMP or
providing a new VLTRO that would roll over existing ones.
Hans-Werner Sinn:
Rescuing Europe from the Ground Up – Project
Syndicate
Europe’s crisis is far from over, though the
insurance that the ECB has offered, free of charge, to buyers of EU members’
government bonds has temporarily calmed financial markets. Europe should now
use the calm between the storm fronts to reformulate its monetary union,
including provisions for temporary exit.
UNITED STATES
How to Measure
Corporate America’s Huge Profits – WSJ
The 13 Most Important
Charts of 2013 – Economic
Policy Institute
FEDERAL
RESERVE
5 Things To Ponder:
The Taper Edition – dshort
5 disparate views on the effect, and potential outcome, of the Federal
Reserve's latest move.
Great Graphic: The
Fed's Mandates: How Close? – Marc
to Market
Although it is commonly talked about as two mandates, and even Fed
officials often use that short-hand, in fact, the Fed has three mandates. As it celebrates its 100-year anniversary, it
behooves us to keep the third mandate in mind:
financial stability.
Fed’s Rosengren: FOMC
Dissent Focused on Counseling Patience – WSJ
Despite Falling Short
of Goals, Fed Suffers From QE-Fatigue – WSJ
This is how history should judge Ben Bernanke – WaPo
TAPER:
YIELD CURVE
The big steepener unwind – Sober Look
Why would the 5-year
note sell off the most while the long bond rallied?
The Twist-er Tantrum:
Bernanke Unleashes 5-Sigma Curve Flattening – ZH
The term structure of Treasury yields has collapsed by 5 standard
deviations to 3-month flats.
Citi Warns Of
"Deja Vu All Over Again" For Treasury Bond Bears – ZH
Previous endings of
the Fed’s bond buying programs have seen a quick spike in yields that proves to
be short-lived as the reality of a still weak global economic backdrop takes
hold.
LABOR
MARKETS
Declining Labor Force
Attachment and Downward Trends in Unemployment and Participation – FED
Fewer Than Half of
Young People Will Be in Work Force – WSJ
FAQ: Unemployment
benefits for 1.3 million expire next week – WaPo
Another look at labor
force participation – Sober Look
ASIA
China: Money market
stress returns – Danske
Bank
There is again focus on the Chinese money market where interest rates
have increased markedly in recent days. The recent spike in interest rates has
also started to weigh on the Chinese stock market.
Confusing Signals in
Chinese Financial Policy Reflect Challenges of Reform – WSJ
Interbank Rates Hit Highest Since the Summer Despite Central Bank's Cash
Injection
No, the Chinese
Communist Party Isn't Threatened by Income Inequality – The
Diplomat
Many Western commentators don’t understand Chinese views no income
inequality.