News: 2014-01-05
This is my biggest links post ever. There are so many interesting threads here I couldn’t leave any aside. Enjoy
Fiscal versus monetary
Washington must not settle for secular stagnation – FT.com
Larry Summers: “The third approach – and the one that holds most promise – is a commitment to raising the level of demand at any given level of interest rates, through policies that restore a situation where reasonable growth and reasonable interest rates can coincide. This means ending the disastrous trend towards ever less government spending and employment each year – and taking advantage of the current period of economic slack to renew and build up our infrastructure. If the government had invested more over the past five years, our debt burden relative to our incomes would be lower: allowing slackening in the economy has hurt its potential in the long run.”
Another disappointing reaction to The Great Market Monetarist Experiment, by Scott Sumner
Macro and Other Market Musings: Paul Krugman Plugs Market Monetarism
Facing cuts, long-term unemployed brace for grim new year
Leading Republicans’ states among worst hit by jobless benefits cuts | World news | theguardian.com
This headline doesn’t support the data because it is Democratic states which are hardest hit
Retreating U.S. stimulus poses risk to world recovery | Reuters
Fed
Rapid QE withdrawal could permanently harm U.S. workers: Fed’s Rosengren | Reuters
Fed could trim bond-buying more sharply in future: Plosser | Reuters
Fed’s Plosser at odds with policy approach favored by Yellen | Reuters
Fed’s Plosser: May Need to Employ Aggressive Tightening Campaign – Real Time Economics – WSJ
fastFT:Fed’s Lacker says US growth may subside – FT.com
“A resurgent consumer, declining unemployment and rising manufacturing orders have several economists expecting a bumper 2014, or at least one that picks up from the mediocre rate seen in the first half of 2013. Richmond Federal Reserve president Jeffrey Lacker is not so sure. Mr Lacker, speaking in Baltimore, Maryland on Friday, said he expected economic output to subside to roughly 2 per cent in 2014, below the brisk 4.1 per cent pace recorded in the third quarter.”
Fed’s Lacker: Taper Decision Was Right Call – Real Time Economics – WSJ
Treasury Yields Climb to Highest Since 2011 as Tapering to Begin – Bloomberg
“The difference between yields on 10-year notes and similar-maturity Treasury Inflation Protected Securities, a gauge of trader expectations for consumer prices over the life of the debt called the break-even rate, widened yesterday to as much as 2.27 percentage points, the most since Sept. 23. It was 2.09 percentage points on Dec. 6, and the average over the past decade is 2.22 percentage points. “
Lenders Look to Fed Tapering to Lift Business Borrowing — Update – WSJ.com
From December: “Bank executives say corporations have held off on taking out loans because they have not seen any near-term risk that interest rates will rise. But tapering by the Fed, which would lead to rising rates, could be the catalyst businesses need take out money to invest in their operations, bank executives said Tuesday.”
Dudley Sees Fed Needs Better Grasp of How QE Works – Bloomberg
Where Ben Bernanke made a difference | Gavyn Davies
John Cochrane on why the Fed’s QE program has ‘no effect’
Fed Cognizant of Bubble Risks, Plosser Says – Real Time Economics – WSJ
FRB: Speech–Bernanke, The Federal Reserve: Looking Back, Looking Forward–January 3, 2014
Bernanke’s last speech as Fed chair
North America
Forget house prices and debt, deflation is Canada’s new bogeyman | Financial Post
BBC News – US car makers report disappointing December sales
This is important as it points to weakness in retail in the auto sector where credit quality has diminished. If we see more of this, we will have a problem especially given the auto sector’s 2014 expansion plans.
Calculated Risk: Merrill Ups Q4 GDP Forecast to 3.0%
I had said I was moving from just below 2% to above 2%. Directionally, I think I need to move even higher, not 3% but mid- to high-2%. Production was high irrespective of final sales and most retail did well in December, with the notable exception of autos.
The Big Bang Theory – POLITICO Magazine
Forecasts for 2014
Manhattan Home Sales Rise to Year-End Record in Deal Rush – Bloomberg
FRB: FEDS Notes: Looking for Shortages of Skilled Labor in the Manufacturing Sector
“the finding that skilled labor shortages are not a significant and widespread restraint on production is consistent with other data continuing to show subdued increases in the wages and salaries of manufacturing workers. “
NAFTA: 20 years of regret for Mexico | Mark Weisbrot | Comment is free | theguardian.com
Noah Smith on Redistribution, by David Henderson
Biggest Lenders Keep On Growing – WSJ.com
The Rich Country Trap – NYTimes.com
Simon Johnson on the banks and lobbying
Simon Johnson Reminds Us That the Banks’ Quiet Coup is Still Very Much in Place | naked capitalism
Europe
Indebted European groups refinance amid strong credit markets – FT.com
Lending to companies in eurozone contracts at fastest pace on record – Independent.ie
Lending falls 4.3pc as repaying debts takes centre stage – Independent.ie
Spanish Bond Yield Falls to 3 1/2-Year Low as Unemployment Drops – Bloomberg
Spanish Bonds Rise as Recovery Prompts Search for Higher Yields – Bloomberg
“Spain’s 10-year yield dropped 35 basis points, or 0.35 percentage point, this week, to 3.87 percent at 5 p.m. London time yesterday. That’s the biggest decline since the period ended Sept. 7, 2012. The 4.4 percent bond maturing in October 2023 climbed 2.845, or 28.45 euros per 1,000-euro ($1,360) face amount, to 104.21. The yield spread over benchmark German bunds narrowed to as little as 193 basis points yesterday, down from a euro-era record 650 basis points set in July 2012. Italy’s 10-year yield dropped 30 basis points this week to 3.92 percent. That’s the biggest decline since April 5. “
What eurocrisis watchers should look for in 2014 – FT.com
“The euro crisis is not over, but one important shift has taken place. The policy debate has concluded. The decision not to set up a common backstop for the eurozone’s banks has closed the last window for any form of debt mutualisation as a tool of crisis resolution. All of the adjustment will take place through austerity and price deflation in the periphery. Most of the adjustment still lies ahead. “
España no cree a Rajoy: el 70% de la población no confía en la recuperación – elEconomista.es
70% of Spain doesn’t believe Rajoy that Spain is in a recovery. That tells you that the recovery hasn’t ‘trickled down’ yet. Of course, we heard the same thing in the US in 2009 and we are still in recovery. The question is why? Some of it is probably about it not being a real recovery i.e. it is a statistical recovery only.
Ghost towns left by Bulgarians seeking work in UK – Telegraph
The concern here is a form of nationalism in Britain. I have seen articles on this in a lot of countries including Germany and the Netherlands. We should watch this topic as a political flashpoint in Europe.
ekathimerini.com | Pimco does not see Greece returning to bond markets in 2014
Jack Lew to press Germany to boost domestic demand – FT.com
Decline in German car sales accelerated in 2013: KBA | Reuters
ekathimerini.com | Cyprus bank deposits rise for first time in 17 months
Bank of Finland Warns Debt Level Poised to Double: Nordic Credit – Bloomberg
Markets
Dan White: Oil prices are finally set to tumble this year – Independent.ie
Pimco Bond Funds Have Rough 2013-Kiplinger
Gross’s Mistake on Fed Taper Echoes Across Pimco Funds – Bloomberg
Pimco Total Return has record $41.1 billion outflow in 2013: Morningstar | Reuters
Emerging Markets
Sober Look: Turkish central bank’s current predicament
Mideast
Iraq Forces May Soon Start Attack to Recapture Fallujah – Bloomberg
John Kerry offers support for Iraq but no US troops on the ground – FT.com
NSA
Napolitano Says No Clemency for Edward Snowden – Bloomberg
Is the NSA Spying on Congress? – Senator Bernie Sanders of Vermont
Senator presses NSA to reveal whether it spies on members of Congress | World news | theguardian.com
Technology
Andreessen: Tech Bubble Believers ‘Don’t Know What They’re Talking About’ – WSJ.com
With T-Mobile? AT&T will give you $450 to switch … kind of
Facebook reads private messages to boost “Likes,” lawsuit claims — Tech News and Analysis
Business Insider rejects $100 M buyout offer: Fox – MarketWatch
Music sales decline for the first time since the iTunes Store opened | The Verge
Analyst predicts Apple will transform notebook market with 12-inch hybrid ‘iPad Pro’ this fall
AT&T offers T-Mobile users up to $450 credit to switch | Reuters
This is why an AT&T – T-Mobile merger was anti-competitive
Fired? Speak No Evil – NYTimes.com
“clause No. 12: No Disparagement. “You agree,” it reads, “that you will never make any negative or disparaging statements (orally or in writing) about the Company or its stockholders, directors, officers, employees, products, services or business practices, except as required by law.” If I don’t agree to this nondisparagement clause, I will not receive my severance — in this case, the equivalent of two weeks of pay. Two weeks? Must be hard times out in San Francisco, or otherwise why the dirt parachute — and by the way, is that the sort of remark I won’t be allowed to make if I sign clause No. 12? “
Economics
Crisis Compels Economists To Reach for New Paradigm – WSJ.com
This article is from 2009 but very good reading.
Arthur Laffer Interview – Business Insider
Art Laffer is telling us his model of how inflation gets transmitted was wrong. Kudos to him for honesty. “”Usually when you find the model this far off, you’ve probably got something wrong with the model, not that the world has changed,” he said. “Inflation does not appear to be monetary base driven,” he said. “
Reinhart-Rogoff Find Hangovers in Bank Crises: Cutting Research – Bloomberg
Full Interview, Econ Focus, Third Quarter 2013 – Federal Reserve Bank of Richmond
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