What follows is the reason that last week was completely quiet here at Alpha.Sources. Essentially, I was working away on a detailed look at the ECB's balance and the related question of whether we can call, what it is that ECB the is doing quantiative easing or not? Needless to say, I think that this question is an important one in a general context since if I am right and if the crisis has indeed now moved to the center and periphery of Europe, in stead of the US, then a close look at the ECB's policies is not only merited, but quite important.

With the distinct risk of turning this into a cheesy copy of the Oscars show I should thank Edward Hugh for his patient and thorough back-editing of the piece for English language as well as the actual arguments themselves. All mistakes and mishaps naturally fall entirely

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Who does not like a good argument? I for one do, especially when it comes to economics. A lot of water has already gone under the bridge relative to the note published a couple of weeks back by VariantPerception on the Spanish banking sector which provided a timely and, in my opinion, accurate analysis of the issues facing the Spanish banking and financial system as a function of the dire macroeconomic situation Spain finds itself with skyrocketing unemployment and lingering (and entrenching) deflation. Now, the reason that I point out how "a lot of water has gone under the bridge" is quite simply that I know the people at Variant and, as you know, I also know Edward Hugh who was very effective in dessimating the conclusions of the report across his (second) empire now growing on Facebook. As Edward noted here on A Fistful of Euros in

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Before I left for my summer break in Greece I asked, among other things, whether Hungary was trying to escape original sin or more specifically (and implicitly) whether Hungary is using the current relatively favorable market environment to claw back control over monetary policy. Recent comments from central bank Deputy Governor Ferenc Karvalits suggest that this may very well be the case (quote below from Bloomberg);

Investors see Hungary becoming “significantly” less risky, allowing for further reductions in interest rates, central bank Deputy Governor Ferenc Karvalits said. “Over the past few months, international risk appetite has improved significantly, the risk assessment of the region and Hungary has stabilized, and this allows for further easing of monetary conditions,” Karvalits said in an interview on Kossuth Radio today.

The Magyar Nemzeti Bank lowered its benchmark interest rate by half

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by Edward Hugh: : L'Escala de Empordàbr /br /According to a once-upon-a-time post on the Economist's a href="http://www.economist.com/blogs/certainideasofeurope/2007/07/a_fistful_of_reply.cfm#list-comments"Certain Ideas of Europe Blog/a Edward Hugh “was very cross” about some of the journalism they were serving up over at that prestigious journal. Well, not to worry, since this time he is hopping mad. And the issue which lies behind his wrath is essentially the same one, how to interpret and understand the demographic processes which are currently so evidently affecting our societies. In what is simply the latest episode in a long and sorry saga (if you want documentation, please see the comments Claus Vistesen and I nailed to their "Wall" in the above linked post) this week's print issue contains a href="http://www.economist.com/sciencetechnology/displaystory.cfm?story_id=14164483"a research review from their science and technology correspondent/a who is evidently not backward in coming forward with headline grabbing claims. According to the said corresponedent the demographic transition ...

by Edward Hugh: Barcelonabr /br /br /The Russian ruble strengthened the most in more than three months against the dollar yesterday (gaining 1.7 percent to 32.2247 per dollar at one point) as oil rebounded above $60 a barrel and OAO Sberbank reported better-than-expected earnings. Sberbank shares jumped 5.1 percent after first-quarter net income turned out to be above analyst estimates. But the rise was also helped by the fact that Russia’s central bank spent approximately $2 billion from reserves to try to stop the ruble from falling yesterday, taking central bank reserve spending over the two working days since they lowered interest rates half a percantage point on Friday to around $4 billion, a href="http://www.bloomberg.com/apps/news?pid=newsarchiveamp;sid=aTqgrOY1vdEo"according to reports in the newspaper Kommersant/a.br /br /Russia’s central bank cut its main interest rates for the fourth time in less than three months at the end of last week after the government estimated the ...

by Edward Hugh: Barcelonabr /br /This post accompanies my recent piece on Sweden. I have been scratching my head and trying to see what could be learnt from making a comparison between Finland and Sweden. Some of the differences are obvious - one is in the euro, and the other isn't, once can adjust monetary policy and currency values, and the other can't. Others are less so. Finland's goods trade surplus has been declining steadily since joining EMU while Sweden's has remained relatively constant. And Swedish males live on average three years longer than their Finnish counterparts. So what is important here, and why? And if convergence theory has anything positive to be said for it, shouldn't we be able to observe so sort of convergence going on here.br /br /br /First, and just to remind ourselves, here is the chart from Claus Vistesen which shows what the relation ...

by Edward Hugh: Barcelonabr /br /br /Two weeks ago a href="http://fistfulofeuros.net/afoe/economics-country-briefings/are-the-imf-and-the-ecb-lining-up-against-the-eu-commission-over-latvia/"I drew attention to a revealing press conference given by IMF First Deputy Managing Director John Lipsky and European Central Bank governing council member Christian Noyer/a where it seemed a rather different posture was being taken on the Latvian question than that which is being transmitted from Brussels. Then a href="http://fistfulofeuros.net/afoe/the-european-union/is-the-latvia-intervention-team-assembling/"P O'Neill found a message on Twitter/a which suggested the topic of the Latvian budget had been unexpectedly added to the EcoFin agenda.br /br /Today a href="http://www.bloomberg.com/apps/news?pid=20601095amp;sid=aPlxlddcc8lI"Bloomberg report/a that Barclays Capital’s chief economist for emerging Europe Christian Keller thinks that the IMF's posture of continuing to withhold funds even after the approval of the spending cuts “signaled that the rift between the IMF and EU has widened” .br /br /Now I don't want to see connections were there are none, but it is a coincidence that Christian Keller works for ...

by Edward Hugh: Barcelonabr /br /br /pa href="http://3.bp.blogspot.com/_ngczZkrw340/SlmdGD2bh-I/AAAAAAAAOoo/P8vnyB3RTno/s1600-h/bulgaria+population.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 258px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5357485959172294626" border="0" alt="" src="http://3.bp.blogspot.com/_ngczZkrw340/SlmdGD2bh-I/AAAAAAAAOoo/P8vnyB3RTno/s400/bulgaria+population.png" //abr /br /br /The International Monetary Fund this week forecast the recession in Bulgaria would be deeper than it previously predicted. Such a decision should come as no surprise to anyone, since the country's economic dynamics in both the short and long term look extremely unstable, and Bulgaria is now almost certainly headed towards a series of more or less hair-raising roller-coaster rides. Even the briefest of glances at the population chart above should lead even the most sceptical among us to stop and think a little about the possible economic implications of such an appauling demographic outlook. As can be seen, the opening to the west brought a sharp outflow of people in the late 1980s (mainly ethnic Turks), but the important thing ...

by Edward Hugh: Barcelonabr /br /br /Basically this post accompanies the Swedish monetary policy and devaluation post I have just put up. But first some theoretical structure from Claus Vistesen.br /br /a href="http://2.bp.blogspot.com/_ngczZkrw340/SlMSCXRnOaI/AAAAAAAAOhs/0ENVvdtHpMA/s1600-h/claus+model.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 190px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5355644213690579362" border="0" alt="" src="http://2.bp.blogspot.com/_ngczZkrw340/SlMSCXRnOaI/AAAAAAAAOhs/0ENVvdtHpMA/s400/claus+model.png" //abr /br /As we can see above, the idea is that as median population age rises the current account dynamics of a country change. The last ageing phase of the diagram is purely speculative at this point. Basically we simply do not know what happens after a society starts to dis-save at an advanced median age. We have, as yet, no experience with this phenomenon.br /br /Now, as is well known, Sweden's median population age has been rising steadily, and reached 41.3 in 2009 according to the latest estimates from the US Census Bureau. This makes it a little ...

by Edward Hugh: Barcelonabr /br /Animated by last weeks export driven positive PMI result, a href="http://www.guardian.co.uk/business/feedarticle/8588125"Sweden has now taken poll position in the quantitative easing process/a and has committed to keeping 0.25% rates on hold till the end of 2010 at least. Mind you, they are lucky enough to have Princeton economist and avid deflation fighter a href="http://www.princeton.edu/svensson/"Lars Svensson/a in there on the board to steer them through all this. Good for Swedish growth, Krona negative, great for exports. Let's go, let's go, let's go.br / br /br /br /blockquoteSweden's central bank cut its key interest rate by 25 basis points to a new record low of 0.25 percent in a surprise move on Thursday, and said it would offer one-year loans to banks to foster lending. The Riksbank said it expected interest rates to remain at that level until late 2010. Deputy Governor Lars Svensson disagreed with the decision ...