W/E: Weekly Support (updated!)
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EUROPE
Draghi
has few legal ways to fix the euro – FT
By
pussyfooting around with liquidity policies instead of acting on inflation, the
ECB has signalled that it is safe to bet against the inflation target
Why is
Krugman so forgiving of the ECB? – The Money Illusion
When
combined with the current geopolitical uncertainty, the UK inflation report
should keep the BOE on hold well into 2015. The fear of rate normalization has
been pervasive across major central banks and dovish attitudes are likely to
prevail at Jackson Hole (see quote). Once again, the longer the central banks
delay the start of this process, the more difficult and disruptive the exit
will ultimately be.
Balanced-budget
fundamentalism – Mainly
Macro
“European
policymakers are doing everything they can to stop recovery taking off, so they
should not be surprised if there is in fact no take-off. It is balanced-budget
fundamentalism, and it has become religious.”
Blogs
review: The forever recession – Bruegel
As the
recovery takes hold in the US, Europe appears stuck in a never-ending
slump. With the ECB systematically undershooting its inflation target and
recent signs that inflation expectations could become de-anchored, the bulk of
commentators in the blogosphere are again calling for more monetary actions. Noticeably,
some have completely lost hope in the ability of the European institutions to
turn this situation around and are now calling for countries to simply break
away from the EMU trap.
The
Italian Runaway Train
– A Fistful
of Euros
With
markets continuing to finance debt levels that any official study will soon
have to recognize as unsustainable lack of proactive policies from the ECB will
only fuel concerns that the size of the pill may become just too big for the
bank to persuade Germany comfortably swallow, leaving the specter of private
sector involvement to once more rear its ugly head.
Talk
about being disappointed…By the Bundesbank – Market
Monetarist
The
Bulgarian Banking Disaster – Forbes
MACRO NUMBERS
Euro area
international trade in goods surplus €16.8 bn – Eurostat
Euro area trade surplus narrowed in
June – TradingFloor
Spanish
trade deficit narrowed in June – TradingFloor
ASIA
10-year
JGB yields near 0.5%
- Sober
Look
The only
way to rationalize buying 10-yr JGBs at 0.5% is believing that Japan will have
a deflationary environment over the next decade and/or the central bank will
absorb (or even monetize) the bulk of new issue bonds.
OTHER
Daily
Central Banks – WSJ
Hilsenrath’s
Take: Global Central Bankers Out of Sync, Head to Jackson Hole * Fed Bets It
Won’t Wait Too Long on Rates * Kocherlakota Says Fed Still Missing Inflation,
Jobs Goals * Carney Says U.K. Rate Rise Doesn’t Need Wage Growth * China’s
Effort to Clean Up its Banking System is Gaining Momentum
Daily
Macro – WSJ
Geopolitical
concerns continue to be the driving factor in markets, as the conflict in Ukraine replaces that in Iraq as the problem du jour. But as we
get toward the end of the week, expect the names “Yellen” and “Draghi” to get
more and more mention among analysts, due to speak at the Kansas City Fed’s
annual monetary policy jamboree in Jackson Hole, Wyoming, which kicks off on Friday.
Week ahead:
1) Minutes from BoE, Fed and RBA 2) Aug purchasing manager indices from Europe
3) Geopolitics of Ukraine, Gaza, Iraq 4) Jackson Hole a non-event
Inflation
Is Warming Up * Housing Still Has Problems *
There
are two types of central bankers . . . – The Money Illusion
Britain is
starting to catch up to Germany in the jobs/growth stakes. Some people who are sympathetic to my ideas
wonder why I wasn’t tougher on Ben Bernanke.
Perhaps because I see his role as being similar to Carney’s—pushing the
Fed to move as far as he could, given the institutional inertia. At the other extreme you have the ECB, and
also the new head of the Indian central bank
Secular
Stagnation, Meet Data
– Evan
Soltas
If real
interest rates are going to be low for a long period of time, as secular
stagnation implies, then the market should say that, and the way it would is
through forward rates. So what do we see?... Markets anticipate that real
interest rates will return slowly to one percent. For reference, prior to the
recession, these rates averaged about 1.5 percent, at least on an ex-post
basis.
Global
macroeconomic imbalances are shrinking (and not) – FT
There’s a
flows vs stock issue here, and the improvement in the former hasn’t been enough
to bring about an improvement in the latter
FINNISH
Mitä aiot, Vladimir Vladimirovitš? – Nordea
Ukrainan kriisi pitkittyy ja viimeisetkin Venäjän taloutta
kannatelleet tekijät, luotonannon kasvu ja yksityinen kulutus, ovat
murenemassa. Talous ei kuitenkaan määrittele Venäjän politiikkaa.