Some hope the European Central Bank will use quantitative easing to help
the fragile region, but as Albert Gallo, head of macro credit research at RBS,
points out, with sovereign bonds already at multiyear lows QE will not help
where it is needed:
Follow ‘MoreLiver’ on Twitter
EUROPE
Speech by Dr Andreas Dombret, Member of the Executive Board of the
Deutsche Bundesbank, to the Federal Reserve Bank of Dallas, Dallas, 15 April
2014.
Derivatives and the
Eurozone crisis – voxeu.org
The sovereign bond spreads of peripheral Eurozone countries surged while
the economic conditions were gradually deteriorating. This column provides a
new explanation for this phenomenon. It suggests that the markets in credit
default swap indices have exacerbated shocks to economic fundamentals. The same
change in fundamentals had a higher impact on the spread during the crisis period
than it had previously.
Just to put this in perspective, US home prices are now
roughly at the levels they were a decade ago. UK home prices have
risen over 40% over the same period.
By focusing exclusively on flexibility, past labour market reforms have
completely neglected incentives. There is severe allocative malfunctioning in
the Italian labour market. Wages do not reflect sector productivity in the
short run, while in the long run they rise in sectors in which productivity
falls.
DEFLATION WATCH
How Do You Say
“Nobody Could Have Predicted” In Swedish? – Krugman
/ NYT
Sweden has stopped flirting
with deflation and moved right in.
European Debt
Deflation – Krugman
/ NYT
Low
inflation/deflation precisely where it does the most harm.
Swedish central
bankers and Korean ferryboat captains – The Money Illusion
Eight EU states in
deflation as calls grow for QE in Sweden – The
Telegraph
Sweden’s Riksbank admitted
in its latest monetary report that something unexpected had gone wrong
EUROPEAN CENTRAL BANK
ECB moving closer to
unconventional policy – Sober
Look
The tricky part is that the more effective the monetary transmission, the riskier are the assets.
Constructing
negativity and the ECB – FT
How a move to negative is constructed will, of course, have much to do
with what it is intended to achieve — a weaker euro at last check — but we also
can’t help but think it would be cool to make sure it won’t cause too much harm
either.
UKRAINE / RUSSIA
The US Treasury faces a more formidable prey with Russia, the world's biggest
producer of energy with a $2 trillion economy, superb scientists and a
first-strike nuclear arsenal
Russia’s annexation of Crimea and threats against Ukraine are a reminder
to the countries of Eastern Europe, particularly those in the Balkans, of
NATO’s centrality to national – indeed, European – security. But maximizing
NATO's effectiveness requires it to deepen its engagement with its most
vulnerable members.
Moscow seems determined to
get its way in Ukraine. Its overriding aim
is to prevent Kiev from aligning with Europe and the west. It may
well succeed in the short term. But in the longer term, Vladimir Putin is bound
to fail.
There was no commitment by Russia to pull back the
tens of thousands of troops it has massed on Ukraine’s border, which Washington and Brussels have both been
pressing for.
No Fear Factor – Quartz
With western oil companies tripping over themselves to assure Putin,
it’s no wonder he’s so confident
The cost of stopping the Russian bear now is high but it will only get
higher if the west does not act
Boys from the
blackstuff – The
Economist
The government of Kieve has no obvious counters to Russian-inspired
occupation of industrial sites
The military balance:
Gathering storm – The
Economist
Russia would find holding
the territory of Ukraine harder than taking
it.
Financial sanctions: Turning
off the taps – The
Economist
More could be done to punish Russia.
UNITED STATES
Household deleveraging
in the US has impeded consumption and market activity in recent years, holding
back the recovery. Despite substantial progress in balance sheet repair, a key
question is whether deleveraging has ended or whether further adjustment is
needed. This column presents time-varying equilibrium estimates of the
household debt-to-income ratio determined by economic fundamentals. Taking into
account the latest available data, the estimates suggest that the household
deleveraging process may have ended at the end of 2013.
Don’t Know Much About
History, Rand Paul Edition – Krugman
/ NYT
Public and Private
Sector Jobs: Carter, Reagan, Bush, Clinton, Bush, Obama – Calculated
Risk
Monetary policy and
the economic recovery – FED
Chair Janet L. Yellen at the Economic Club of New York, April 16, 2014
ASIA
China’s Bloated Financial System: A Quick Guide – The
Big Picture
BOJ Hopes for
Slowdown in Overseas Production Exodus – WSJ