Daily Archives: August 18, 2010

Yes, you can now vote on the best way for the UK government to cut spending. It might take you a while: there were 44,000 suggestions and they have received only rudimentary classification.

Nonetheless, people are busy voting. Popular suggestions so far include: Read more

Ralph Atkins

With Europe’s performance hanging largely on the fate of Germany, it is hardly surprising that any fresh news from the continent’s largest economy. But some indicators are more useful than others.

The ZEW “economic sentiment” indicator published by the Mannheim-based ZEW institute has the advantage of early publication: August’s was released on Tuesday. But since the global financial crisis erupted in mid-2007, it has been unclear exactly how it should be interpreted.

During the early 2009, for instance, when German GDP was collapsing, the ZEW was rising steadily. But for much of the second half of last year – when a recovery was underway – it was broadly flat and then falling.

Now, I have realised what we have all be doing wrong. We have been looking at the chart upside down. Read more

States in northern Europe have formed a new group to boost financial stability, the Nordic-Baltic Stability Group. Members – Norway, Sweden, Finland, Estonia, Latvia, Lithuania and Iceland – hail from in and outside the EU, and in and outside the euro.

Banks beware. The memorandum of understanding says members will keep tabs on – and share – information about significant banks, draw up risk assessments in a common template, and share the burden when things go wrong. Faced with cross-border banks and the risks they pose, states are fighting back:

The financial integration between the Nordic and Baltic countries warrants deeper cooperation

 Read more

Rapidly falling inflation and continued appreciation of the krona has prompted the Icelandic central bank to double its rate cutting to 1 percentage point.

Sedlabanki, the Icelandic central bank, has been cutting continuously since 2008, though held rates constant (as most banks did) during early 2009. Since then, rates have been cut in 50bp notches at consecutive meetings – half today’s cut. Read more

Market expectations of the future base rate have changed considerably, according to the Bank of England’s latest minutes:

There had been a significant shift down in the path for Bank Rate implied by forward market interest rates over the three months since the May Inflation Report – by 90 basis points by the middle of 2012. Further out, UK implied forward rates at ten years had fallen 30 basis points over the past three months: real implied forward rates had risen by around 20-30 basis points and implied forward inflation had fallen by 50-60 basis points.

Other interesting tidbits:

The recent decline in goods price inflation suggested that the impact on prices of sterling’s
depreciation might be near to completion

And: Read more

The Fed’s decision to reinvest has denied the patient more methadone; it has merely postponed an inevitable period of cold turkey:

If you diagnosed the horrific financial crisis at the end of 2008 and early 2009 as a temporary depression, the prescription was clear: vast amounts of antidepressants in the form of the biggest fiscal and monetary stimulus the world has seen. Eventually the patient would feel cheerier and the world a brighter place. In time, it could be weaned off the medicine. Read more