Here
are the ”best” from my posts of the ending week. Last week’s edition here.
EUROPE
Herr
Nein: The Bull in the Euro Zone's China Shop Photos – Spiegel
German Central Bank head Jens Weidmann has developed a reputation in Europe for saying no to
everything. He is skeptical of efforts to save the euro and isn't shy about
saying so. But is he
right?
Bundesbank
calls for capital levy to avert government bankruptcies – Reuters
Bundesbank's Stunner
To Broke Eurozone Nations – ZH
Germany's Bundesbank said
on Monday that countries about to go bankrupt should draw on the private wealth
of their citizens through a one-off capital levy before asking other states for
help.
Rehabilitation could still hurt,
AQR watch – alphaville / FT
Financials: What I learned at
Davos – Morgan Stanley
Squaring
the Eurozone’s Vicious Circle – Project Syndicate
Against this background, European policymakers and regulators must take
action to encourage banks to diversify their sovereign-debt holdings. Of
course, a common fiscal backstop (along with a single banking supervisor) would
eliminate the bias. But there is strong resistance to the fundamental changes
to the eurozone’s architecture that this would require. A more feasible
solution would be to introduce an explicit regulatory bias against home-country
sovereign-debt holdings.
The ECB is much too stodgy – Bruegel
The euro fuelled a
leveraged bet that went bad. The ECB is best positioned to orchestrate the
painful sharing of losses. If the ECB does not reinvent itself for the times,
it will be hobbled by its obsolescence and by increasingly acrimonious
politics. And the flawed euro project will be further
damaged.
Euro area deflation monitor – Danske Bank
The lower inflation is
not contradicting stronger growth in the euro area, in our view. Lower
commodity prices have increased purchasing power and the most recent decline in
core inflation is due to methodological changes and not a result of a drop in
wage growth. Real wage growth has shown a clear improvement from its previous
decline.
Euro
Jobless Record Not Whole Story as Italians Give Up – BB
Bloomberg survey
reveals serious labour and social crisis in Europe – New Europe
While economists predict unemployment in December stayed at an all-time
high of 12.1 percent, with about 19 million jobless, that tally excludes
legions of adults who would also work if they could. Bloomberg calculations for
the third quarter show a wider total of 31.2 million people of all ages are
either looking for jobs, willing to do so though unavailable, or else have
given up.
UNITED STATES
Fed Foward-Guidance Fallacies And The Untenable Status Quo – ZH
Fed Foward-Guidance Fallacies And The Untenable Status Quo – ZH
And The Taper Continues – Tim Duy’s Fed Watch
But what seems more
clear is that the US is about to be hit by another disinflationary shock. That deserves careful attention, because
inflation, I think, is at this moment the most important variable to watch as
far as Fed policy is concerned. The Fed
is pushing forward with tapering on only the forecast of future inflation. That forecast appears under threat.
EMERGING MARKETS
China: UBS Says Market Wants Default as Risks to Pile Up – BB
The market wants policy makers to allow the first onshore bond default
to reduce long-term hazards to the financial system.
Monitor: Chinese Credit Crunch – Danske Bank
5
Takeaways From the Emerging Market Rout of 2014 – WSJ
Don’t blame the Fed * Not all emerging markets are the same * Expect
investors to discriminate * Countries that dither may need bailouts * The
contagion still could spread *
Flash Comment: Mapping the EM sell-off – Danske Bank
The dominant trigger
is likely to have been worries about Chinese growth and the financial situation
in China. However, local factors have also contributed
to the ‘EM hurricane’. Overall, we can identify three characteristics of the
sell-off. The hardest hit countries are those with large external imbalances
(such as Turkey and South Africa), commodity exporting countries (like Brazil and Russia) and countries with rising domestic
political/regime uncertainty (such as Ukraine and Turkey).
GEM Currencies Oversold – Short Side of The Long
GEM currencies have
been in a downtrend for almost 3 years * Weakness in GEM currencies can usually
mark a crisis low *
The EM line in the sand – Humble Student
It seems that the
problems currently faced by selected EM currencies are due to local conditions,
e.g. the problems in Argentina are unrelated to the problems in Turkey, and the risk of a global EM currency crisis
sparked by Fed tapering is well under control.
2014: The year of emerging emergency – TradingFloor
Emerging markets got
into trouble when the Fed first mentioned the taper. But now that the turmoil has
become widespread and is beginning to affect developed economies' asset prices,
a peep behind the curtain does not reveal a pretty sight.
Emerging Markets - Emerging
Crisis or Media Hysteria? – dshort
Turkey - helping the lira,
killing the economy? – Danske Bank
Turkey - Das Boot – MacroMan
Rajan Warns of Policy
Breakdown as Emerging Markets Fall – BB
India’s central bank Governor Raghuram Rajan (former IMF chief economist)
warned of a breakdown in global policy coordination after the Federal Reserve
further cut stimulus, weakening emerging-market currencies from the rupee to
the Turkish lira.
Steen Jakobsen: Russia a catalyst for EM and global troubles – TradingFloor
EM crisis unlikely to
go away * Devaluation worries gather momentum * Hike in interest rates a disease
OTHER
The IMF is Courting New Risks with a Change in Policy on Debt Restructuring – PIIE
“Currency collapses and
output dynamics: a long-run perspective” – alphaville / FT
FINNISH
Eurostako hyötyä Suomelle? – Akateeminen talousblogi
Kruunu ottaa omansa – viisi
havaintoa kiristyvästä verotuksesta – EVA
EVA: Verojen korotuskierre kurittaa Suomea – EK
Milloin
asuntomarkkinoilla alkaa tapahtua? – Tyhmyri
Luottamusindikaattorit
kääntyivät laskuun – EK
Yritysten
luottamus talouteen heikkeni – YLE