The ending week's best reads, previous edition here.
Thoughts on the Euro’s Outlook in 2013 – PIIE
Despite the numerous predictions of its demise, the euro is alive and well at the end of 2012. Indeed, it has again held its value against other currencies during the year,1 confounding skeptics just as it did a year ago. As 2012 comes to a close and the last European Union Council of the year has ended—there have been seven in 2012!—it is time to take stock. As someone who ended 2011 on a positive note for the euro, I am happy to report that the outlook remains positive for 2013.
The European Commission on Tuesday released a special report devoted to euro zone countries with large current account surpluses, Germany in primis, and while it diplomatically refrained from making forceful policy recommendations, it emphatically noted that the weak bank regulations and wage restraint exercised by Europe’s largest economy ineluctably has had significant impact on other members of the currency union.
How often does it happen that countries pertaining to the same economic area are in dramatically different business cycle positions? How severe is the divergence? How persistent is it?
Ifo Business Climate Improves – CESIFO
Ifo points to further improvement – Danske Bank (pdf)
German Business Confidence Rises for a Second Month – BB
What to expect from the EU in 2013 – Open Europe
Nordic Outlook 20-Dec 2012 – Danske Bank (pdf)
Nouriel Roubini: The tail risks of a Greek exit from the eurozone or a massive loss of market access in Italy and Spain have been reduced for 2013. But the fundamental crisis of the eurozone has not been resolved, and another year of muddling through could revive these risks in a more virulent form in 2014 and beyond.
Jens Nordvig: Fears of an imminent Greek exit from the Eurozone have subsided, for now. This column attempts to measure the probability of a Greek exit, finding that the changing fortunes of Greek political parties, and the possibility of an early election, mean that the risk of a Greek exit may actually be quite high. It suggests that, despite investors' efforts to measure political risk, a persistent sense of unease about the Eurozone’s future is set to continue into 2013 and that Eurozone financial assets will thus continue to embed significant risk premiums in the coming years.
With two short sentences, the head of the European Central Bank took the heat out of the euro zone crisis this year. In 2013 Mario Draghi has to live up to even bigger expectations.
Why Mario Draghi scores AAA on PPP – Hugo Dixon / Reuters
The ECB boss, though, should not let the plaudits go to his head. Much of the euro zone is in deep recession. If growth doesn’t return, the crisis could enter a new ugly phase and his powers will be sorely tested.
Agenda 2013: the next steps in completing EMU – ECB
Speech by Jörg Asmussen at Internationaler Club Frankfurter Wirtschaftsjournalisten, Frankfurt am Main, 19-Dec-2012
Implications of Japan’s new government: Another false dawn – Nordea (pdf)
or read the summary
Bank of Japan Preview: Intense political pressure for more easing – Danske Bank (pdf)
BOJ Loosens With Pledge to Review Inflation Objectives: Economy – BB
Under pressure from PM-elect, BOJ boosts stimulus again – Reuters
The Bank of Japan delivered its third dose of monetary stimulus in four months on Thursday in a prelude to more aggressive action next year, as it faces intensifying pressure from the country's next leader for stronger efforts to beat deflation.
Bank of Japan Eases – Global Macro Monitor
The policy move was as is expected and not quite the Abe QE that has sparked the massive move in stock market and yen. The next meeting is big as the Prime Minister Abe will be in power. The Nikkei is a down about 1 percent on profit taking and the yen a bit stronger.
Mark Carney, Governor of the Bank of Canada, 11-Dec-2012, Presented to CFA Society Toronto
Chicago Fed president Charles Evans has gone from dissenter to intellectual leader in just a year. The future of the recovery might be at stake.
Policy measures and reduced short-term risks buoyed markets (all the files here)
What is this "financial cycle"? While "there is no consensus on the definition," according to Mr Borio, it can be understood as a sequence of "self-reinforcing interactions between perceptions of value and risk...which translate into booms followed by busts."
(audio) BizDaily: Central Bankers Take Centre-stage – BBC (mp3)
Central bankers appear increasingly to be seizing the reins of economic power these days, as the politicians throw up their arms and say - you fix it. Ben Bernanke is setting Federal Reserve interest rates for years in advance, and when the ECB's Mario Draghi says he'll do "whatever it takes to save the euro", people believe him. But is the shift from the politicians to the central bankers really a good thing?
CitiFX's 12 Charts Of Christmas – ZH
"Momentum Ignition" - The Market's Parasitic 'Stop Hunt' Phenomenon Explained – ZH
or the summary
Outrageous Predictions 2013: Extreme complacency – Saxo Bank
or direct pdf
Some outliers for 2013 – alphaville / FT
Deutsche's 13 Outliers For '13 – ZH
Chief Economist’s Corner – On the threshold of 2013 – Nordea (pdf)
Financial markets will focus on whether the euro crisis is finally solved, whether the US can get to grips with its fiscal policy, whether interest rates remain at record lows and equity markets continue higher.
My Interview – MoreLiver’s Daily
Nordea Risk Perception Index week 51 – Nordea (pdf)
Spread compression and decreases in implied vol. Risk premiums likely to continue tightening in beginning 2013, but upside risks remain. (summary)
Things That Make you Go Hmmm – Grant Williams / ZH
The Ultimate Valuation Matrix For Global Stocks – ZH
The National Intelligence Council is composed of the 17 U.S. government intelligence agencies. The Council’s Global Trends Report has, since 1997, worked with a variety of experts both in and out of government service to examine factors such as globalization, demography and the environment to produce a forward-looking document to aid policymakers in their long-term planning on key issues of worldwide importance.
Exclusive: Larry Page on Google – Fortune
Gift Giving Guide for the Traders in Your Life – The Big Picture
Ifon Sinn TE:lle: Tämä räjähtää vielä silmille – TalSa
Saksalaisen Ifo-tutkimuslaitoksen johtaja tukee Suomen vakuusvaatimuksia ja varoittaa euron pelastusyrityksistä.
Keskuspankeissa kaikkien aikojen aikapommi – TalSa
Keskuspankkien kokeelliset kriisitoimet vaikuttavat vaarattomilta, mutta pankkien taseissa paisuu kaikkien aikojen aikapommi. Rahakokeiden riskit paljastuvat äkisti, kun yksityinen luottojen kysyntä alkaa taas kasvaa. Silloin keskuspankeilla on edessään vaikea valinta: raju inflaatio tai entistä pahempi velkakriisi.
Vaikeuksien kautta nousuun: Suomi kasvuun vasta 2014 – Danske Bank (pdf)
Danske Bank: Suomen talous nousuun vasta 2014 – TalSa
Pankkiunioni tai ei – Suomi kantaa muiden riskejä – Jan Hurri / TalSa
Edes "aito pankkiunioni" ei vähentäisi euromaiden liikoja velkoja eikä pienentäisi liikoja pankkiriskejä. Rakenteilla onkin Frankensteinin finanssihirviö, jossa riskit on vain tarkoitus ensin pilkkoa ja sitten koota uuteen kokoonpanoon. Suomi saisi taas kantaakseen muiden riskejä – niin kuin kriisitoimissa tähänkin asti.
9 kuukautta rauhaa – sitten euron haavat revitään auki – TalSa
Suomi voi ensi vuonna nousta syksyn suosta maailmantalouden elpyessä. Toivo on kuitenkin pettävää, sillä syynä on eurokriisin välirauha, joka ei ratkaise vääjäämättömiä ongelmia. Lisäksi väliaikaisenkin elpymisen tiellä on muutama merkittävä kysymysmerkki. Näin arvioivat Taloussanomien haastattelemat asiantuntijat.
Suomen valtion toiminta voi loppua rahojen loppumiseen – Ruotsin valtion ei – tyhmyri