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Friday, July 29

29th JULY


Summary: The two first euro crisis links are really worth the time. I will take a break for couple of days from these regular updates, have a great weekend. I know there are some regular followers, and it would be nice to get some feedback on what you like and what you would like to see here. Send a mail or leave an anon-comment.

EURO CRISIS
System relies on moral hazard, high integration leads to contagion, lack of governance. Authors see three scenarios: all-it-takes, end of moral hazard or limbo, leading to disorderly end game.
Europe on the Brink – Peterson Institute for International Economics

ex-chief economist from IMF: EU just muddling through, not solving anything.

and Krugman comments the above



Merkel can probably push through the latest bailout in parliament, but the inevitable follow-ups are going to be hard sells.
Subscription required: Germany and the euro: Angela the dragon non-slayer – The Economist


Should the Greek bonds be impaired on balance sheets or not?
Greece as a test for auditors – alphaville / FT

Large part of Germany’s boom is because of demand from the periphery. Nasty feedback cycle that has now collapsed.


FINANCIAL CRISIS
Roundup of headlines from NYT, WSJ, CNBC

Rich world governments can’t stop stimulating but can’t add to debt either. Either option could lead to nasty negative feedback.
Running out of options – The Economist

America and Europe are flailing because their leaders are failing. They seem to be too small for the tasks at hand, too petty, and too myopic.”


Fed blog article highlights the U.S.’s GDP diff to real potential GDP and suggests full recovery will take a long time.
Are We There Yet? – Economist’s View


EMERGING


DIVERSION

The road to investment losses… – Economic Musings

Experimental markets, elusive equilibrium/steady state and the connection to behavioral finance