Weekender's background readings. Feedback is appreciated - I really don't know what my three readers like.
Previously on MoreLiver’s:
8.9. Weekender: Weekly Support (last week’s review, next one
previewed)
7.9. Guest: On Mario's Shock and Awe (excellent)
7.9. US Close: BigU = QE3 (payroll special)
EUROPE
George Soros: Why Germany Should Lead or Leave – Project
Syndicate
If Europe is to escape its crisis, its leaders must awaken Germany to the misconceptions that are guiding its policies. At this point,
that will not happen unless they persuade Germany to make a choice: become a benevolent hegemon or exit the eurozone.
Why early sovereign default could save the euro – voxeu.org
The recent announcement by the ECB that it will
start to buy Spanish and Italian sovereign debt has been warmly welcomed
throughout Europe. But this column argues that by doing so the ECB is digging the euro’s
grave. It says the solution is default, either through inflation or debt
restructuring – and that debt restructuring has many advantages if it is done
early enough.
Pierre Moscovici's speech at Bruegel Annual
Meeting – bruegel
“…where the eurozone stands at the moment, and
what we think should be the path forward.”
Five myths about the euro crisis – Opinion
/ WP
The Europeans will never get their act together
* Greece’s departure from the euro zone would doom the single currency * German
taxpayers will never bail out Greek (or Spanish or Italian) pensioners * If
austerity measures continue, voters will revolt and extremists will take over *
The euro crisis will tank the U.S. economy and could
even swing the presidential election
Saving the euro: Tick tock – The Economist
Even if the ECB successfully intervenes, the
euro zone’s politicians must ultimately determine the euro’s fate. Although
work on a banking union has begun, they are many months away from actually
setting one up. Leaders increasingly recognise the dangers of excessive
austerity, but they still routinely demand harsh budgets as a token of merit.
The debate about mutualising some government debt, which this newspaper thinks
essential to restoring confidence, has barely begun. The vague German demand to
shift political power to federal Brussels has hardly been
broached in France.
An East European Perspective on the Euro Crisis – PIIE
In the eastern part of the European Union,
however, an illustrative contrast has arisen that tells us a lot about how to
act and not to act in a financial crisis. The contrast between successful Estonia and Latvia on the one hand, and struggling Hungary and Romania on the other could hardly be greater or more instructive.
Small Atlantic nation enjoys growth and
employment gains after failing to rescue its banks. Mainland Europe remains stuck with stagnation,
decline, and ruinous "rescue" packages.
Recapitalisation of failed banks - some lessons
from the Irish experience – BIS (pdf)
Address by
Mr Patrick Honohan, Governor of the Central Bank of Ireland, at the 44th Annual
Money, Macro and Finance Conference, Trinity College, Dublin, 7 September 2012.
54% of Germans Want Constitutional Court to Kill the ESM; Merkel's Disingenuous Reservations – Mish’s
EUROPE: BANKING UNION
The promise and pitfalls of the euro zone’s
plan for a banking union – The Economist
The euro zone was woefully late in trying to
stabilise its banks and ensure that taxpayers do not have to pay when they
fail. Moreover, it is unlikely ever to create a regulatory system like
America’s which allows the FDIC, for instance, to wind up a bank in a weekend.
Banks in Europe tend to be larger as a share of national GDP than those in America, and European
companies rely more on banks than American ones. More important, in a
corporatist political culture, small banks are often tools of political
patronage and big ones are treated as national champions.
By Vítor
Constâncio, Vice-President of the ECB, Lecture to be held at the start of the
academic year of the Duisenberg School of Finance, 7 September
2012
EUROPE: ECB
No One Happy Except Stock Market; Discord
Emerges in Spain, Italy, Germany to ECB Announcement – Mish’s
So “Super Mario” did it. The European Central
Bank president on Thursday announced “unlimited bond buying” to tame profligate
eurozone members’ borrowing costs.
The Eurozone designs a halfway house – A
Fistful of Euros
One implication is that Ireland and Portugal can’t look forward with too much certainty to full programme exit even
if they perform exactly as envisaged under their programmes. Another is that
the Eurozone could be running a fairly large after-care facility long after the
peak of the crisis has passed.
USA
Labor participation for men in the US hit the lowest level
on record; decline among younger men is particularly sharp – Sober
Look
Economic Surprise Index has turned positive – Sober
Look
Podcast: World Weekly with Gideon Rachman – FT
After the
conventions: the race for the White House: Did
President Barack Obama’s Democratic convention speech convince the American
electorate that he is worth another four years in the White House? Or has Mitt
Romney begun to swing the race towards the Republicans? With the opinion polls
at level pegging, Gideon Rachman is joined by John McDermott and Richard
McGregor to discuss how the parties stand post convention.
Mitt Romney’s Fair Share – Project
Syndicate
Joseph E.
Stiglitz: Romney may not be a tax evader;
only a thorough investigation by the US Internal Revenue
Service could reach that conclusion. But, given that the top US marginal income-tax
rate is 35%, he certainly is a tax avoider on a grand scale.
USA: FED
Thoughts on the Michael Woodford Paper…. – PragCap
Unless you’ve been sleeping under a rock for
the past few days you’ve likely heard about Michael Woodford’s presentation at Jackson Hole. The paper he presented (see here) is an expansive review of current Fed policy and potential policy
options. The primary takeaway from Professor Woodford’s paper was his
endorsement of NGDP Targeting.
The Federal Reserve's Balance Sheet: A Primer
and Projections – FED
Overall, this suggests that market participants
believe that unconventional monetary policy will be in place for some time,
likely depressing longer-term interest rates for a number of years.
Expectations about the Federal Reserve's
Balance Sheet and the Term Structure of Interest Rates – FED
This paper provides a systematic assessment of
the effect of the Federal Reserve's asset purchase programs on Treasury yields,
with particular emphasis on the role of market expectations about the evolution
of the Federal Reserve's balance sheet and of interest rates on the impact of
the programs.
The anticipation of aggressive monetary
expansion by the Fed woke up inflation expectations – Sober
Look
Analysis: I expect QE3 on Sep-13 – Calculated
Risk
The Scary Math Behind The Mechanics Of QE3, And
Why Bernanke's Hands May Be Tied – ZH
CHINA
CPI inflation accelerated to 2.0% yoy in August – ASA
Industrial
production increased by 8.9% yoy in August 2012 –ASA
Retail
sales increased by 13.2% yoy in August – ASA
Fixed asset
investment growth slowed in August – ASA
Real estate
investments picked up slightly in August – ASA
Is The Chinese Growth Story Over? – qfinance
Much has been said about the recent data coming
out of China. Not only has the aggregate rate of growth fallen below 8% but recent
ECONOMICS
Podcast: In the Balance - Central bankers: too
powerful or too weak? (25min) – BBC
(mp3)
As the ECB brings in a new scheme to save the
euro, the programme asks whether central banks have been over- reaching
themselves. Have they been poking their noses into stuff that should be left to
elected politicians? Plus central bankers' impenetrable jargon: In the
Balance's resident comedian Colm O'Regan reckons parents could deploy that kind
of language next time the kids ask for more pocket money. Discussing these
issues with Lesley Curwen - naturally in the clearest way possible - are
Randall Kroszner, former member of the Board of Governors of the Federal
Reserve, who was chair of its Committee on Supervision and Regulation of
Banking Institutions during the global financial crisis; Professor David
Blanchflower, formerly a member of the Bank of England's interest rate-setting
Monetary Policy Committee and economist Gabriel Stein, from the Official
Monetary and Financial Institutions Forum.
Confronting the jobs crisis under tight fiscal
constraints – voxeu.org
Many advanced country governments face the dual
challenge of promoting job growth while pushing ahead with spending cuts. This
column discusses how well-designed fiscal policy reforms can help boost
employment without busting the government budget.
The state of the Macro Wars – Noahpinion
In other words, monetary easing may be more
popular among economists than was fiscal stimulus, but may end up being a
harder sell. It's sad to say, but the Macro Wars may seem increasingly like the
Trojan War, with the Pro-Easing Alliance playing the role of
Cassandra...
Towards a steady-state economy? – alphaville
/ FT
…our present money system can only function in
a growing economy. Money is created as interest-bearing debt: it only comes
into being when someone promises to pay back even more of it.
Why not to expect recovery anytime soon – Free
exchange / The Economist
Financial crisis recession will tend to result
in a longer-term recessionary drag than a “normal” business cycle recession.
Understanding bubbly episodes – voxeu.org
Over the last two decades, US aggregate wealth has
fluctuated substantially. This column presents research that takes a first step
towards measuring the reasons why. It finds that most recent fluctuations are
driven by bubbles and argues that models of rational bubbles with financial
frictions can improve our understanding of recent macroeconomic history.
Taming the financial cycle – BIS (pdf)
Speech by Mr Jean-Pierre Danthine, Vice
Chairman of the Governing Board of the Swiss National Bank, at the 30th SUERF
Colloquium, Zurich, 5 September 2012.
Tedtalks: The Informal/Underground Economy – Global
Macro Monitor
Robert Neuwirth spent four years among the
chaotic stalls of street markets, talking to pushcart hawkers and gray
marketers, to study the remarkable “System D,” the world’s unlicensed economic
network. Responsible for some 1.8 billion jobs, it’s an economy of
underappreciated power and scope. (video 13 min)
HOUSING
Ageing, property prices and money demand – BIS
When the baby boomers joined the workforce and
started saving, money supply and property prices entered a rising trajectory.
We conclude that demography was the long-run driver of this process, basing our
argument on data from 22 advanced economies for the 1950-2010 period.
Rising home values in the face of stagnant
incomes – ZH
For the first time since September of 2010,
nearly two years ago, has the Case Shiller 20 City Index realized a
year-over-year gain. Does this signify a sustainable turning point for the
market? At this point it is too hard to tell for a couple of reasons.
MARKETS
Explaining The Market's Brand New 15x Forward
Multiple – ZH
S&P 500 Snapshot: Bad Jobs Report? Better
Chance of Prompt QE!
– dshort
More on Disappearing Daytime vs Overnight
Volatility – MarketSci
For the last 30 years, the daytime session has
been more volatile than the overnight, usually by at least 50%. But over the
last few years, the market has fundamentally changed and today, the daytime and
overnight sessions are about equally volatile.
Global Valuation: 10 Year PE Ratios – Mebane
Faber
Treasury Yields: Quick Update – dshort
OTHER
Introduction to Computational Finance and
Financial Econometrics – Coursera
Free online
course from University of Washington.
A Primer On Defining Indexing Methodologies – The
Capital Spectator
August 2012: The Month in Charts – AlphaNow
/ Thomson Reuters
Nice charts
– but heavy webpage, expect trouble viewing them.
Book Bits | 9.8.2012 – The
Capital Spectator
Citigroup projects that the desert nation may
become an oil importer in the next 20 years. "If Saudi Arabian oil
consumption grows in line with peak power demand, the country could be a net
oil importer by 2030," Heidy Rehman wrote in a 150 page report for the
bank.