SAO PAULO | By Benjamin Cole via Historinhas | No, I do not have dense pages of calculus for the reader, purporting that QE would be ruin or divine salvation, or that minor deflation is the theoretical apex of an economic model.
MADRID | By JP Marín Arrese | Most banks have comfortably overcome the stiff hurdles raised by the EU-wide stress test unveiled on Sunday. A reassuring outcome was widely expected, as Europe cannot afford to destabilise its financial sector when economic performance looks so grim. Yet, securing a fair result fails to endorse banking resilience should the underlying assumptions underestimate key risks. This shortcoming was evident from the start. For, the stress test builds on potential shocks failing to reflect key vulnerabilities, thus hampering its ability for properly assessing financial stability in rough times.
MADRID | The Corner | Gloomy inflation data in the eurozone prompted a debate about recovery losing momentum. But while tackling disinflation should be a priority, we shouldn’t be too worried about growth. “Leading indicators of growth are not – at present – consistent with any major slowdown in the world economy. Indicators of financial and monetary conditions and many industrial metal prices are relaying a similar message,”analysts at UBS commented on Thursday.
HONG KONG | From Barclays analysts | China inflation fell further in September, to 1.6%, below consensus (1.7%), but in line with our forecast. The key downside drivers were lower commodity prices, and declining food inflation. Inflation has now fallen to its lowest levels since January 2010, a 56-month low.
MADRID | By Francisco López | The ECB’s measures since June have been oriented to fight the ghost of deflation, increasing the Eurozone’s economic activity and, in an indirect manner, managing the euro’s depreciation. For the moment Mr Draghi has failed in the first two goals, although he has succeeded in the third one. The euro is plummeting –which is good news.
SAO PAULO | Benjamin Cole via Marcus Nune’s Historinhas | Well, if a Martin Wolf can call for permanent QE by all Western governments, and if a John Cochrane can suggest the U.S. Federal Reserve should completely liquidate the U.S. national debt, than I guess my USE-ME program is worth trotting out as well. I mean anything goes these days, no?
Guest post by Jean-Sylvain Perrig, UPB Chief Investment Officer | The US economy is back on track. Its second-quarter bounce was sharper than previously thought and it is expected to stay on a reasonably good path of 3% in the coming quarters, thanks notably to a rebound in capex, a falling unemployment rate and a sharp improvement in the real estate sector. That will further boost consumer confidence, which has already reached its highest level in seven years.
SAO PAULO | Marcus Nune’s Historinhas- Guest Post by Benjamin Cole | If you ever farted loudly on a crowded elevator, then you know the reaction of most economists to the idea that national debts should be monetized through central bank quantitative easing (QE), aka “printing money.”
MADRID | By Luis Alcaide | In an op-ed at Wall Street Journal on Thursday, New EU Vice Commissioner Jyrki Katainen pledged for stimulating growth in the eurozone by keeping the proper fiscal consolidation. But his comment could be put in a different way: stimulating growth by all means as the only way of achieving fiscal consolidation. Stimulating growth means that deflation, a price level increase inferior to 2% (the Stability Pact target) is a more pressing requirement than meeting the 3% public deficit in the short term.
MADRID | By J.P. Marín Arrese | The ECB asset purchases drive has received staunch support from the financial markets. No wonder, as it turns the central bank into a huge and largely undemanding backstop. Under the covered bond programme, it will switch banking liabilities into fresh liquidity. The ABS purchases scheme will transfer loan portfolio exposure to the ECB. Overall, both measures amount to a solid backstop for redressing banking solvency. The move comes most timely, as stress tests and asset quality reviews are due shortly to be published.