13th Dec - Weekender: Best of the Week

Here are the ”best” from my posts of the ending week.

EUROPE

  EUROPEAN CENTRAL BANK

The ECB’s reserve currency dilemma – The A-list / FT

The eurozone is in a unique situation. It is the issuer of the second-most important currency, whose demand by the rest of the world is on the rise. At the same time its trade surplus with the rest of the world increases. This requires innovative solutions.

Message to the Euro: You’re Flying Too High – WSJ

Like a tired, broken record, the euro exchange rate again highlights the impotence of a monetary structure that saddles the euro zone with short-sighted deflationary policies when central banks everywhere else have been pulling out all stops to reflate their economies.

The ECB’s Bridge Too Far – Project Syndicate

Is Europe’s economic crisis mutating once again? If debt fears are now being superseded by the danger of deflation, as recent data suggest, the European Central Bank has its work cut out for it – and there is nothing to suggest that it is up to the task.

The Eurozone: If only it were the 1930s – voxeu.org

The legacy of public debt resulting from the crisis in the Eurozone is a serious threat. Both the size of the problem and the options to address it make life much more difficult for policymakers than was the case in the late 1930s after the collapse of the gold standard. For some countries, a ‘subservient’ central bank might be preferable to the ECB.

Draghi Builds Stress-Test Credibility in ECB Bank Review – BB

More than 90 percent of economists surveyed by Bloomberg News said that stress tests next year, in the final part of an ECB-led review of the euro area’s most prominent banks, will be more credible than previous exercises

Continued financial fragmentation will put ECB on the hook – Bruegel

Insufficient agreement on the banking union next week may force the ECB to engage in non-standard monetary policy measures to fulfill its mandate

Fans of ECB Quantitative Easing Gain a Strong Friend – WSJ

Deutsche Bank chief economist David Folkerts-Landau said that at some point the ECB will likely have to revert to “genuine QE,” amid very weak inflation and stagnant economic activity.

Peter Praet Interview with the Financial Times – ECB

ECB and the treatment of sovereign debt – ECB Watchers

FT:  ‘ECB to get tough on sovereign bond risks’ – Presseurop

ECB Admits Sovereign Bonds Are Not Riskless – ZH

Praet: the ECB is considering forcing banks to hold capital against sovereign debt, meaning it would no longer be treated as risk-free. He added that such an approach would make “it unlikely that the banks will use central bank liquidity to excessively increase their exposure to sovereign debt.”

Monthly Bulletin, December 2013 – ECB

  BANKING UNION

Eurozone inches towards banking union – Open Europe 

EU bank bailout fight: more leaked documents – Brussels blog / FT

EU set to fast-track rules hitting bank creditors – Reuters

Bondholders and large depositors in a failing European bank face losses from the start of 2016, EU negotiators agreed on Wednesday, in a deal to spare taxpayers from further bailouts.

  CRISIS COUNTRIES

The Pain In Spain Is Mainly... Everywhere – ZH

Economic hardship in Spain looks likely to continue as loan defaults surge and the unemployment rate remains the second highest in the EU.

Ukraine CDS hits 4-year high as tension rises for investors – beyondbrics / FT

UNITED STATES

US budget deal reduces fiscal uncertainty – Danske Bank

  FEDERAL RESERVE

Bullard Offers Up The Tiny Taper – Tim Duy’s Fed Watch

The Federal Reserve wants to taper.  Wants very badly to taper, in my opinion.  The recent employment reports seem to be giving a green light… Whether December or January or later, policy is close to an inflection point with a shift from more to less accommodation in the works.

The Fed’s options – alphaville / FT

1) Tapering 2) A change to the forward guidance thresholds 3) Adding an inflation floor to the existing thresholds  4) A small reduction in IOER 5) Other stuff

It’s all been about QE – alphaville / FT

Krugman pointed out that whether a government finances itself through bond purchases, which are later bought by the Fed, or whether it prints money directly, makes no difference.

Fed Scorecard: Where Do Officials Stand on Tapering? – WSJ

Fed officials haven’t sent a clear signal of what they are likely to do. The critics of the program remain eager to start winding it down, while the supporters generally have been noncommittal about what they want to do at the meeting.

Taper Or No Taper - What The FOMC Has Really Said – ZH

Deutsche believes there is a chance that the Fed’s institutional biases lead it to taper earlier then the economic data might suggest is optimal.

Confusion Over The Fed's [December|January|March] Taper – ZH

OTHER

The Most Important Economic Stories of 2013—in 42 Graphs – The Atlantic

A record year for stocks. A meh year for wages. A weird year for Wall Street.

Nobel prize-winning economists take disagreement to whole new level – The Guardian

Robert Shiller says mismatch between Eugene Fama's findings and theories must make him feel like a priest who has discovered God does not exist

The Downfall of John Taylor –  AICIO

Generations of hedge funds rose and fell; FX Concepts endured. Then, the unshakeable disintegrated. So how did John Taylor’s steady reign end in ruin?

Investment Fads and Themes, 1996-2013 – The Reformed Broker

FINNISH

Auttaako edes nollakorko eurotaloutta liisteristä? – Jan Hurri / TalSa

EKP ei koske korkoihin enää tänä vuonna mutta ensi vuonna koskee: keväällä ohjauskorko painuu nollaan ja pysyy pohjassa jopa vuosikymmenen loppuun. Tämä ei ole hyvä uutinen vaan kertoo, että eurotalous on liisterissä vielä pitkän aikaa. Näin uskovat ekonomistit, jotka varoittavat eurotaloutta uhkaavasta "iäisyystaantumasta".

Suomi haihattelee – ja ui ajopuuna liittovaltioon – Jan Hurri / TalSa

Hallituksen EU-selonteko saa vasta julkistetuissa asiantuntijalausunnoissa osin kolean vastaanoton. Valtiovarainministeriön entinen huippuvirkamies Peter Nyberg kaataa hallituksen niskaan jäävettä. Hänen mukaansa Suomen EU-politiikka on haihattelua, joka vie meitä tahdottomana ajopuuna kohti liittovaltiota.

Olisipa eurotalous edes pelätyllä Japanin tiellä – Jan Hurri / TalSa

EKP:n pääjohtaja Mario Draghi vakuuttaa, että euroalue ei ole 1990-luvun Japani eikä euroalue ole pelätyllä "Japanin tiellä" menossa deflatoriseen talousanemiaan. Oikein ja väärin: euroalue ei ole yhtä heikossa kunnossa kuin Japani – euroalue on heikompi kuin Japani oli kymmenen vuotta oman kriisinsä alkamisesta.

Brysselin kone: Sisäinen devalvaatio vai irti eurosta? – YLE

Stefan Törnqvist on sitä mieltä, että jos Suomi haluaa olla kilpailukykyinen, niin sillä on edessään kaksi vaihtoehtoa. Sisäinen tai ulkoinen 20-30 % devalvaatio.

Brysselin kone: Matkalla tiukempaan talouskuriin – YLE

EU:n harjoittamasta jäsenvaltioiden talouksien ohjauksesta puhuu Taneli Lahti, joka toimii komission varapuheenjohtaja Olli Rehnin kabinetissa neuvonantajana.

  SUHDANNE-ENNUSTEET

Talousennuste — Suomi elpyy rakenteellisten ongelmien varjossa – Handelsbanken

Handelsbanken synkkänä Suomen taloudesta – TalSa

Pankkiekonomisti: Hallituksen rakennepaketti ehdottoman välttämätön – Verkkouutiset

LähiTapiolan suhdannekatsaus 2/2013 – Sijoitustalous

Jari Järvinen: Suomen teollisuustuotanto on painunut vuoden 2003 tasolle – AP

Karu ennuste: "Suomen vientisektori ei välttämättä toivu totutulla tavalla" – TE

Euro ja talous 5/2013: Talouden näkymät – Suomen Pankki

Liikanen: Julkisen talouden kestävyys edellyttää rakenneohjelmaa – Suomen Pankki

Talouden rakenneuudistukset ja julkisen talouden kestävyys – Suomen Pankki