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2016-12-30

Experterna i stort sett eniga: Finland hade kunnat lyfta sig snabbare ur recessionen med en egen, fritt flytande valuta.

När det gäller den period med krympande BNP som inleddes 2012 är experterna i stort sett eniga:

Finland hade kunnat lyfta sig snabbare ur recessionen med en egen, fritt flytande valuta. 


DI/TT 30 december 2016

Campaign ‘Make Malta Great’ will focus on Malta’s presidency of the Council of the European Union

It was the morning after the night before and I was riding an elevator to the 13th floor in the European Commission. 

Two men smiled at each other and one said "I hear Greece has been saved". "Couldn't be better," beamed the other, before disappearing into the vastness of bureaucracy.
It felt like news shared from a distant front: "Bastogne has been relieved" or "Malta is holding out".
Gavin Hewitt, the BBC's Europe editor blog 26 March 2010

In 1940, Malta found itself at the heart of a raging battle between Allied and Axis powers for naval control of the Mediterranean.

2016-12-29

The low-for-long era is over. BoJ and ECB both changed their mantra

from whatever it takes to less is more targeting steeper yield curves 
and the transmission mechanism of stimulus to the real economy, 


Monetary stimulus without appropriate fiscal action 

encouraged misallocation of resources to zombie firms and banks that should otherwise restructure;


created asset bubbles in high dividend equities, property and precious metals, as well as art and collectibles; 


and widened the gap in relative wealth between the haves and the have-nots.


Alberto Gallo, FT 27 December 2016

2016-12-21

Italy to bail out Monte dei Paschi di Siena bank, FT


Last-gasp private rescue plan for the world’s oldest bank looks set to fail


FT 21 December 2016

Italy is to nationalise Banca Monte dei Paschi di Siena 

Ambrose, Telegraph 9 December 2016

Party Like It’s 19,990. Authers, ETFs, Hussman

Party Like It’s 19,990

So. Is the smart money with ETFs? - the most successful investment innovation of our time.



The blog kept by the fund manager John Hussman is much followed, even if it is also much derided. 

He has been incorrectly bearish on US stocks for much of the post-crisis era. But it would be unwise to ignore him.

John Authers FT 21 December 2016

2016-12-20

Noah Smith: Here’s a list of 10 excellent economics books and papers I read in 2016 that should be accessible to the general public.

Charles Gave, paterfamilias of Gavekal, about Italy

When Italy adopted the euro in 1999, he had argued that Italy would change 
from being an economy with a high probability of many currency devaluations 
to one with the certain probability of eventual bankruptcy. 


John Mauldin 7 December 2016

The cyclically adjusted p/e (CAPE), a measure created by economist Robert Shiller, “now stands over 27

has been exceeded only in the 1929 mania, the 2000 tech mania, and the 2007 housing and stock bubble,” 

MarketWatch 20 December 2016

Secular Stagnation Forever? Mauldin

Promoting economic growth and employment is one of the Fed’s core missions, assigned to it by Congress in (I believe) 1974. 
It was a triumph of Keynesian thought over Hayek’s beliefs; and despite all evidence to the contrary, most market participants still think that monetary policy is the magic that drives the business cycle. 
Policy is supposed to moderate the boom-and-bust cycle and lift the economy out of recessions within a reasonable period. 
On that point, monetary policy has failed miserably. We’re seven years out of recession and have yet to see GDP growth break above 3%.
The Fed’s answer in this week’s episode was to throw in the towel: Expect more of the same. 

Fed still at near zero ZIRP Mauldin


Today’s young Wall Street hotshots have never seen anything like that. To them the jump from 0.5% to 0.75% must seem like a big deal. It’s really not. 

If the chart above were a heart monitor readout, we would say this patient is now dead and that last blip was an equipment glitch.


2016-12-15

The Eurogroup is the real villain in Greece today, not the IMF

Greece was patently insolvent. It needed a textbook debt write-off to restore viability. 

This was blocked because everybody feared a calamitous chain-reaction through Portugal, Ireland, Spain, and Italy.


Ambrose Evans-Pritchard 14 December 2016

Greece cannot be condemned to austerity for ever

Pierre Moscovici, European commissioner for economic and financial affairs, taxation and customs, 
FT 15 December 2016

2016-12-14

America’s growing strong dollar conundrum poses a threat to Mr Trump’s vows to slash the trade deficit

William Cline, a senior fellow at the Peterson Institute for International Economics, see further currency gains ahead.

FT 13 December 2016

2016-12-12

What causes asset bubbles? Noah Lucas

Most econ models are still based on rational expectations, the idea that people don’t systematically make errors when forecasting the future,

A small but increasing number of papers are asking how markets would behave if investors improperly extrapolate recent trends into the future.

Noah Smith, Bloomberg 8 December 2016

Bankernas så kallade likviditetsreserver består till stor del av andra bankers bostadsobligationer

Storbankerna är skyldiga att hålla en viss mängd tillgångar som ses som likvida, som alltså enkelt kan säljas vid behov.

Bankernas så kallade likviditetsreserver består till stor del av andra bankers bostadsobligationer, ett korsägande som kritiserats av bland annat internationella valutafonden.


SvD Louise Andrén Meiton 12 december 2016

2016-12-11

Italy is to nationalise Banca Monte dei Paschi di Siena


as soon as this weekend, wiping out investors in a dramatic escalation of the country’s banking woes and political crisis.
The Italian treasury has been left with no other option after the European Central Bank refused to give the crippled lender more time to clinch a deal with private funds.  

2016-12-10

“Bonds Don’t Necessarily Lose Value When Rates Rise”

Most people don’t apply the right maturity and/or duration to their portfolios

Cullen Roche

2016-12-09

Era of quantitative easing is drawing to a close

arguably the greatest monetary policy experiment since John Law began dabbling with fiat paper money in France

Robin Wigglesworth, FT 8 December 2016

2016-12-08

Niall Fergusson about Brexit: I'm going to admit that I was wrong

He also issued a scathing critique of the EU, which he said 

'deserved Brexit' after failing on 'monetary union, foreign policy, migration policy, radical Islam policy'

Rogoff: If the US economy really does have massive quantities of underutilized and unemployed resources

the effect of Trump’s policies on growth could be considerable.

In Keynesian jargon, there is still a large multiplier on fiscal policy. 

It is easy to forget the biggest missing piece of the global recovery is business investment, and if it starts kicking in finally, both output and productivity could begin to rise very sharply.
Those who are deeply wedded to the idea of “secular stagnation” would say high growth under Trump is well-nigh impossible. But...




Interest rates follow very long-term cycles.

This chart highlights a 35-year (1946-1981) US bond market,

and our most recent-35 year (1981-2016) bond market

MarketWatch 8 December 2016





China, even minor increases in short-term interest rates may squeeze corporate activity and precipitate defaults

"default risks are rising because more and more corporations are relying on the short-term money market to raise the finance they need to repay existing debts."

FT 8 December 2016

2016-12-07

Bill Gross: How policymakers plan to solve a long-term global debt crisis

... 8. If you are a policymaker or politician, plan to eventually retire from the Fed/Congress/Executive Wing and claim it'll be up to the Millennials now. 

Bill Gross, 6 December 2016

Economic theory discredited

Wolf: Real domestic demand in the eurozone was 1.1 per cent lower in 2016 than in 2008

Remarkably, real domestic demand in the eurozone was 1.1 per cent lower in the second quarter of 2016 than it had been in the first quarter of 2008. 

This extreme weakness of demand should not have happened. 


It represents a huge failure. 


Martin Wolf, FT 6 December 2016


2016-12-03

Why did 17.4m Britons ignore the advice of three former prime ministers, the Bank of England governor and the vast majority of businesses?

How were they persuaded to vote for something they knew could make them poorer? 

Därför blir nästa finanskris /Italien/ värre Cervenka


En av få personer på Wall Street som förutspådde den amerikanska bostadskraschen var förvaltaren Steve Eisman, lysande porträtterad i filmen ”The Big Short”.

Enligt Steve Eisman är läget betydligt värre än vad marknaderna verkar vilja inse. Italiens banker sitter på svindlande 3 500 miljarder kronor i dåliga lån.

Steve Eisman räknar med att de får tillbaka futtiga 20 procent av dessa pengar, enligt tidningen The Guardian.
   
Problemet är att om bankerna skulle erkänna denna jätteförlust skulle de i samma andetag gå under och riskera att dra med sig euron i fallet.


2016-12-02

Mnuchin like a throwback to heavyweight predecessors such as Robert Rubin, Lawrence Summers and James Baker III.

Mr Mnuchin plans that would restore the status of the Treasury department as the vital driver of economic policy. 

For those who can remember the pre-crisis era, it felt like a throwback to heavyweight predecessors such as Robert Rubin, Lawrence Summers and James Baker III.

FT 1 December 2016