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<p><div class="image-container" style="width:800px"><div class="image"><p class="source"><a href="http://www.flickr.com/photos/92661859@N00/3154606261/">bitzcelt / Flickr</a></p></div></div>There are still a couple more hours left of the weekend, but the clock is ticking.</p>
<p>Kit Juckes, a currency analyst at Societe Generale, warns of what's about to come:</p>
<p style="padding-left: 30px;">Brace yourselves, a huge week for market starts in a few hours' time with Chinese manufacturing PMIs.  Policy meetings galore and a payroll number to boot. Fireworks are a given, even without minor considerations like the 4th of July!</p>
<p>Indeed, the first of every month is PMI Day, and starting Sunday evening, we'll be covering regional manufacturing reports as they come out (first from Asian countries, then from Europe early Monday morning, and then in <keyword id="6378080" type="COUNTRY" weightage="40" keywordseo="North-America">North America</keyword>).</p>
<p>And that's just the beginning: We have plenty of labor data coming up this week (as well as other data) which will culminate in this Friday's Non-Farm Payrolls report. Given the focus on whether the Fed is ready to pull back from its easing at all, Friday's report will be given an extraordinary amount of scrutiny.</p>
<p>Juckes, meanwhile, summarizes the big discussion still surrounding the Fed, and whether Bernanke made a mistake recently by coming off too eager to tighten.</p>
<p style="padding-left: 30px;"> The weekend press has seen a caravanserai of commentators question either the <keyword id="31671" type="CITY" weightage="60" keywordseo="markets">markets</keyword>' understanding of what Ben said, or Ben's understanding of markets, or both. <keyword id="1737003" type="PERSON" weightage="40" keywordseo="Gavyn-Davies">Gavyn Davies</keyword>, <keyword id="46540" type="PERSON" weightage="40" keywordseo="Paul-Krugman">Paul Krugman</keyword>, Phillip Coggan, the Guardian, the FT, and more. The basic line is that markets over-reacted and the Fed needs to be careful. And despite one of the aforementioned having a <keyword id="52659" type="ORGANIZATION" weightage="40" keywordseo="nobel-prize">Nobel prize</keyword> in economics, I mostly disagree with the interpretation. <strong> I may only be a fool on a hill, but if markets go a bit crazy when the Fed merely invites us to imagine what might happen if they stop buying bonds, I think that is rock solid evidence of over-correlated positions</strong>. The Fed is right to try and let some air out of the balloon. Back off now, and we'll really be in trouble.</p>
<p>Anyway, tune in Sunday evening, when our Sam Ro begins our wall-to-wall coverage of PMI day.</p>

ANALYST: 'Brace Yourselves, A Huge Week For The Market Starts In A Few Hours'

<p><span style="font-weight: 400;"><div class="KonaFilter image-container display-table float_right"><div><div class="image on-image"><p class="source"><span>Reuters</span></p><p class="caption">Loggerhead turtles make their way across the sandy beach towards the sea at Gnejna Bay, in the north of Malta August 11, 2011.</p></div><p></p></div></div>US GDP growth was released on Friday, and the numbers were disappointing. The US economy </span><a href="http://www.businessinsider.com/us-gdp-advance-estimate-q2-2016-2016-7"><span style="font-weight: 400;">grew at an annualized rate of just 1.2% in the second quarter</span></a><span style="font-weight: 400;">, much weaker than expected. So far this year, the economy is growing at about a 1% annual rate, </span><a href="http://www.wsj.com/articles/u-s-economy-grew-at-a-disappointing-1-2-in-2nd-quarter-1469795649"><span style="font-weight: 400;">according to the Wall Street Journal</span></a><span style="font-weight: 400;"> - the worst first-half performance since 2011. </span></p><p><span style="font-weight: 400;">One of the big reasons for this weak expansion is a slowdown in <a href="http://www.people.hbs.edu/dcomin/def.pdf">total-factor productivity</a>, a phenomenon that's been occurring in the US - and, to some extent, other developed countries - since 2004, according to many economists.</span></p><p><span style="font-weight: 400;">A Deutsche Bank research note, which was released before GDP numbers, lamented productivity as "abysmal" and a "substantial risk to the growth outlook."</span></p><p><span style="font-weight: 400;">"Annualized productivity growth has been just 0.9% during the current expansion, and even this low reading has been buoyed by large productivity gains early in the cycle due to massive economy-wide layoffs in the aftermath of the recession," the report states. </span></p><p><span style="font-weight: 400;">And the recent trend has been even weaker - "Productivity has grown at just 0.7% over the last four quarters and at an annualized pace of only 0.6% since the start of 2010."</span></p><p><span style="font-weight: 400;">This "productivity puzzle" was the subject of a </span><a href="http://ftalphaville.ft.com/2016/07/29/2171297/podcast-gavyn-davies-and-tyler-cowen-on-the-productivity-puzzle/"><span style="font-weight: 400;">recent episode of Alphachatterbox</span></a><span style="font-weight: 400;">, the Financial Times' podcast about economics and business. "Puzzle" refers to the seemingly paradoxical idea that our productivity isn't going up, despite all the innovation around us, said Isabella Kaminska, the host of the podcast.  </span></p><p><span style="font-weight: 400;">Kaminska asked two economists - Tyler Cowen, an academic and writer from George Mason University, and Gavyn Davies, a macroeconomist who is now chairman of Fulcrum Asset Management - about what's going on.</span></p><p><span style="font-weight: 400;">Cowen and Davies offered interesting perspectives on what they think is to blame for the slowdown, and how we're going to get out of it. Although, Davies says, he wouldn't call it a "puzzle" necessarily. </span></p><p>"I think there are puzzling elements to it, and I think there are unknown elements to it," he said. "But I think we've kind of explained a lot of it by now." Rather than a puzzle, he would call it a "productivity event" - one that is "really serious and dangerous for the world economy."</p><p><div class="KonaFilter image-container display-table float_left"><div><div class="image on-image"><p class="source"><span>Reuters/Issei Kato</span></p><p class="caption">Humanoid robots work side by side with employees in the assembly line at a factory of Glory Ltd., a manufacturer of automatic change dispensers, in Kazo, north of Tokyo, Japan, July 1, 2015.</p></div><p></p></div></div></p><p>What even is productivity, this crucial element of our economy's growth? According to Davies, it's "the amount of output produced by a given combination of labor and capital inputs." Which means you keep the number of people and machines the same, and see how much more output they create.</p><p><span style="font-weight: 400;">"It's the benefit every year from getting better at what we do, smarter, combining capital and labor together, working more cleverly," Davies explained, "rather than inputting more labor or inputting more machines." </span></p><p><span style="font-weight: 400;">Ideally, it would be increasing. Ideally, we'd be getting better at what we do. </span></p><p><span style="font-weight: 400;">But we're not. And economists can't agree on why that is.</span></p><p><span style="font-weight: 400;">There are a lot of potential explanations circling, one of the most popular of which is that we're actually wrong - productivity isn't slowing down, but rather, we're just measuring growth incorrectly. This is a popular argument in the tech world - that actually, Silicon Valley's innovation is contributing to economic expansion, but people haven't figured out how to factor it into GDP yet, what with so many apps and services being free. </span></p><p><span style="font-weight: 400;">Cowen rejects this idea. Earlier this year he had </span><a href="http://www.nytimes.com/2016/03/06/upshot/silicon-valley-has-not-saved-us-from-a-productivity-slowdown.html"><span style="font-weight: 400;">an article in the New York Times</span></a><span style="font-weight: 400;"> about how "Silicon Valley has not saved us from a productivity slowdown," partly because the slowdown is too big to compensated for by tech progress, and partly because that tech progress is in fact reflected in GDP. </span></p><p><span style="font-weight: 400;">"Most of the value of the Internet is captured in GDP," he said on Alphachatterbox. "It could be that you love looking at Facebook, but that means that you're willing to buy a smartphone, have a broadband connection" - all of which can be measured and go into the statistics. </span></p><p><span style="font-weight: 400;">Then there's another theory, popularized recently by <a href="https://www.amazon.com/dp/B0131KW67U/ref=dp-kindle-redirect?_encoding=UTF8&amp;btkr=1">Robert Gordon's "</a></span><a href="https://www.amazon.com/dp/B0131KW67U/ref=dp-kindle-redirect?_encoding=UTF8&amp;btkr=1"><span style="font-weight: 400;">The Rise and Fall of American Growth," </span></a><span style="font-weight: 400;">that innovation has stalled - that gains we make today aren't as impactful as they were in the past, and won't be in the future.</span></p><p><span style="font-weight: 400;">Davies isn't convinced by this, necessarily. "Innovation is by definition new and unpredictable," he said. "How can we predict whether it's stopped?"</span></p><p><span style="font-weight: 400;"><div class="KonaFilter image-container display-table float_right"><div><div class="image on-image"><p class="source"><span>Wikimedia Commons</span></p></div><p></p></div></div></span></p><p><span style="font-weight: 400;">He added that many innovations from the past, like electricity, took decades to influence the productivity figures. "It might well be that the ability to increase total factor productivity from the Internet is only in its early stages."</span></p><p><span style="font-weight: 400;">The third potential explanation for the productivity slowdown is weak capital investment - we're investing less in capital stock.</span></p><p><span style="font-weight: 400;">"Workers need the innovative equipment and modern supply chains to increase their output per hour, but the capital spending dearth means that isn't happening," the </span><span style="font-weight: 400;"><a href="http://blogs.wsj.com/economics/2015/05/14/wsj-survey-whats-causing-the-productivity-slowdown-economists-are-split/">Wall Street Journal wrote</a> </span><span style="font-weight: 400;">last year. At the time, 94% of economists agreed that weak capital spending had a "large" or "modest" impact on the productivity slowdown, the Journal reported.</span></p><p><span style="font-weight: 400;">Davies agreed with this explanation, to some extent, saying that there was "no doubt that less capital investment has provided labor with fewer machines and has contributed significantly to the productivity slowdown."</span></p><p>Cowen doesn't buy the investment argument so much, he said, or even Gordon's innovation one. Rather, he sees the fundamental problem as a change in people's mentality, a "psychological and sociological phenomenon."</p><p>Essentially, Cowen says, the 1960s and 1970s were remarkably productive decades - "Imagine putting a man on the moon in seven years!" he said. "We can't fix a bridge in seven years today." But they were also volatile decades, "brutish" and even "violent" in some ways. And "a lot of people didn't like living in that world," so they "decided to dig in, and they moved to a more static way of viewing the world."</p><p><span style="font-weight: 400;">And so, Cowen argues that we can't fix a bridge in seven years, not because we don't have the technology to do so or we're not investing enough, but because we have a different mindset than we did in the past. "We're more static, we're more nimby, we're more 'dig-in,' we're more 'you can't build too much in London, it's ugly, I don't like it,'" he said. And the result has been a slowdown in productivity. </span></p><p><span style="font-weight: 400;">So the answer to growth slowdown is going to have to be shaking things up.</span></p><p><span style="font-weight: 400;">"The fundamental cure is going to be painful," Cowen said. "It will involve a lot of volatility along the way, like we've been seeing through this year. The sad reality is that getting out of the productivity slowdown and having a very bumpy ride - those also are two sides of the same coin."</span></p><p><span style="font-weight: 400;">Listen to the entire podcast </span><a href="http://ftalphaville.ft.com/2016/07/29/2171297/podcast-gavyn-davies-and-tyler-cowen-on-the-productivity-puzzle/"><strong>here</strong></a><span style="font-weight: 400;">. </span></p>    <div class="margin-top">        <h3>NOW WATCH: <a href="http://www.businessinsider.com/tiffany-trump-spotlight-rnc-speech-father-donald-daughter-2016-7">Here's what we know about Trump's youngest daughter, Tiffany</a></h3>        <div>            <div>        <div class="ooyala-video-player" data-video-autoplay="false" data-video-id="dzd2N1NDE6z4hJ88dFWjw8fdFPW-NCrc" data-player-variable="ooyalapopvideo" id="ooyalaplayer_popvideo" style="width:1280px;height:720px"></div>        </div>        </div>            </div>

There's been a 'serious and dangerous' slowdown in productivity

<p><table class="image-container float_right" width="200"><tr><td><div class="image"></div><p class="source">Associated Press</p></td></tr></table>WELCOME BACK.</p>
<p>We hope you had an excellent weekend.</p>
<p>If you want to feel gloomy as things get going again, check out the latest from SocGen's Kit Juckes, who talks about the Portuguese Supreme Court rejections of austerity measures, and the fear that global <keyword id="42546" type="UNKNOWN" weightage="60" keywordseo="Growth">growth</keyword> is crumbling again.</p>
<p style="padding-left: 30px;">The weekend talk is all <keyword id="6431122" type="PERSON" weightage="60" keywordseo="euro">Euro</keyword> and of course, all bearish. The CFTC data on Friday night confirmed that the market got itself good and short euro and good and long dollars and that set the scene for the bounce. But Draghi DID hint at lower rates. <strong>And then <keyword id="6359079" type="COUNTRY" weightage="60" keywordseo="Portugal">Portugal</keyword>'s constitutional court threw a fast ball at the Portuguese government</strong>. <strong>Apparently, cutting pay and benefits for the public sector is unfair on the rest so they need to try again</strong>. The result is that there's a hole in the austerity plan and everyone else (ie Spain) is looking to see what happens. Europe has no growth plan, and austerity into recessions is unpopular. And perhaps unconstitutional.</p>
<p style="padding-left: 30px;">Meanwhile, Jens Weidmann is spelling out the same uncomfortable and austere message about winding up banks and the public sector not always being there to bail everyone out, as  Dijsselbloem. <strong>The bottom line of all this is always the same - don't count on growth. Gavyn Davies meanwhile has a piece in the FT wondering whether we are, yet again, seeing a winter bounce in global growth crumble in the face of spring. And he thinks Germany is critica</strong>l. Oops, German data are softening too. ECB will ease further, Europe still lacks a growth plan,it would still be better if the ECB actively pushed the euro down, but that takes a huge mind-set shift. Europe is still trying to be Japanese and even after Friday's nonsense, have you seen how low long-dated JGB yields are in Japan?</p>
<p>So yes, on the plate are: The craziness in Japan, collapsing Euro growth, and now this pesky constitutional court in Portugal saying that some austerity measures are not allowed.</p>
<p>Meanwhile, <a href="http://www.businessinsider.com/march-retail-sales-report-preview-2013-4"><strong>we'll find out Friday</strong></a> if things are really deteriorating again in the US.</p>

Portugal Just Threw Another Dagger At Europe - And People Think We're Seeing Global Growth Crumble All Over Again

<p>On Wednesday, the Federal Reserve stunned the world and shocked the markets by announcing <a href="http://www.businessinsider.com/closing-bell-september-18-2013-2013-9">no change to its $85 billion large-scale asset purchase program</a>.</p>
<p>This program, which is intended to stimulate the economy, has some skeptics worried about runaway inflation and currency destruction.</p>
<p><keyword id="1644621" type="PERSON" weightage="60" keywordseo="Albert-Edwards">Albert Edwards</keyword>, the long-time bearish strategist at Societe Generale, has a new note out in response to the Fed's announcement.</p>
<p>"I?'ve read quite a lot overnight about the Fed backing off on its tapering of QE," wrote Edwards. "I think the excellent Gavyn Davies who writes in the FT nowadays had it spot on with his title "Never underestimate the Fed's dovishness". Personally I am incredulous. I can believe the arch dove Bernanke might have wanted to keep blowing his bubbles but I am amazed that he got the rest of the Fed, or at least the majority, on his side. I am also amazed because the Fed has spent weeks setting the markets up for a taper."</p>
<p>"Their word is apparently not their bond if bonds don't like their words!"</p>
<p>Citing the work of his former colleague Dylan Grice, Edwards speculates that Bernanke and the Fed are aware of the risks, but they've back themselves into a corner.</p>
<p>"They're printing money because they're scared of what might happen if they don't," added Edwards. "This very real political dilemma is what is missing from the simplistic understanding of inflation as ?always and everywhere a monetary phenomenon.? It?'s like they?re on a train which they know to be heading for a crash, but it is accelerating so rapidly they?re scared to jump off."</p>
<p>And that brings us to Germany's Weimar-era hyperinflation. From Edwards:</p>
<p style="padding-left: 30px;">Incidentally, this is exactly the train Rudolf von Havenstein found himself on as President of the Reichsbank during the German hyperinflation. According to Liaquat Ahamed?s work on von<br />Havenstein?s dilemma, in his majestic book ?Lords of Finance' ? ? were he to refuse to print the<br />money necessary to finance the deficit, he risked causing a sharp rise in interest rates as the<br />government scrambled to borrow from every source. The mass unemployment that would ensue, he believed, would bring on a domestic economic and political crisis, which in Germany?s [then] fragile state might precipitate a real political convulsion?. Plus ça change!</p>
<p>Here's Edwards' not-so-subtle view of Bernanke.</p>
<p><div class="image-container display-table"><div><div class="image"><p class="source on-image">Societe Generale, Albert Edwards</p></div></div></div></p>

ALBERT EDWARDS: Bernanke's Easy Money Train Is About To Crash, But The Fed's Too Scared To Jump Off

<p><div class="KonaFilter image-container display-table float_right"><div><div class="image on-image"><p class="source"><span>REUTERS/Ralph Orlowski </span></p><p class="caption">European Central Bank (ECB) President Mario Draghi attends the IMFS Conference 2015 of the Institute for Monetary and Financial Stability in Frankfurt March 11, 2015.</p></div><p></p></div></div>The European Central Bank meets on Thursday, and analysts are expecting a major announcement.</p><p>In late October, ECB President Mario Draghi <a href="http://www.businessinsider.com/european-central-bank-decisions-and-press-conference-october-2015-10">dropped a major hint</a> that there was going to be more monetary easing in the very near future - either in the form of further interest rate cuts, or some form of boost to the quantitative easing programme.</p><p>In a speech this November, Draghi doubled down, saying that the ECB "<a href="http://uk.businessinsider.com/mario-draghi-is-preparing-the-market-for-the-european-qe-bazooka-2015-11">will do what we must to raise inflation as quickly as possible</a>,<span>" a phrase a bit like his "whatever it takes" speech in mid-2012, which was credited with bringing an end to the euro crisis.</span></p><p><span>The meeting concludes at 12:45 p.m. GMT (7:45 a.m. ET), when we'll get any announcement of changes in interest rates, and the crucial press conference starts 45 minutes later.</span></p><p>Here's how things stand at the moment:</p><ul><li>The last ECB interest rate cut (the 11th since November 2008) came in September 2014, when the deposit rate was clipped from -0.1% to -0.2%. Two other policy rates - the fixed rate and the marginal lending facility - were cut to 0.05% and 0.30% respectively.</li><li>In January 2015, the ECB announced a QE programme. It entailed buying €60 billion ($63.41 billion, £42.46 billion) of investment-grade government debt and some other securities it was already buying in smaller schemes, per month.</li><li>This was meant to last until September 2016, or until the central bank saw a meaningful pick-up in inflation. Soon after, the eurozone recovery reached a recent peak, hitting 0.5% GDP growth in Q1. It's since slowed to 0.4% in Q2 and 0.3% in Q3.</li><li>There has been very little pick-up in inflation over the period since QE was announced. Because of tumbling oil prices, consumer prices have risen by basically nothing on aggregate this year. Core inflation, which strips out volatile prices like fuel, rose by 0.9% in the year to November, about half of what the ECB would like.</li></ul><p>And here's what's on the table in the upcoming meeting:</p><ul><li><strong>The ECB could cut rates</strong>. Draghi previously suggested the September 2014 cut was the lowest the ECB could go, but revised his view in October, saying that other central banks had managed to cut rates further into negative territory.</li><li><strong>They could boost QE</strong>. This could mean a number of things. The ECB could extend the universe of bonds it's willing to purchase, into things like municipal bonds. It could extend the suggested end of the programme, or it could increase the amount purchased monthly.</li><li><strong>They could do both. </strong>This would be the both barrels approach - doing both would also loosen up the limits on how much QE can be done. Currently, the ECB can't buy bonds yielding less than the deposit rate (-0.2%). With an increasing weight of EU sovereign bonds carrying negative yields, that would widen the scope that could be bought.</li></ul><p>The one thing that's clear is that it has to be big. Markets have now priced in a move from the ECB, and if they're disappointed it'll likely mean a stronger euro and a slump for European equities, at least in the short term. </p><p>What's interesting is the lack of opposition that Draghi's comments have prompted. Since October, resident Hawks like Bundesbank chief Jens Weidmann have done little more than make lukewarm comments opposing monetary easing in general.</p><p>Over at the FT, Gavyn Davies referred to the ECB as having "<a href="http://blogs.ft.com/gavyndavies/2015/11/22/the-ecb-shows-the-zeal-of-a-convert/">the zeal of a convert</a>." It was years behind other major central banks in its adoption of unconventional measures like QE, but now that it's there, it seems to be far less conservative about its approach.</p><p>The combination of the impending easing from the ECB and the impending rate hike from the Federal Reserve has analysts expecting the euro to fall to parity with the dollar for the first time in more than a decade - analysts at Deutsche Bank, Capital Economics, Macquarie, Citi, Goldman Sachs, Credit Suisse are all expecting a 1:1 exchange rate between the euro and dollar to be reached in the next few months.</p><p><div class="KonaFilter image-container display-table"><div><div class="image"><p class="source"><span>FRED, Business Insider</span></p></div><p></p></div></div></p>    <div class="margin-top">        <h3>NOW WATCH: <a href="http://www.businessinsider.com/family-business-relationships-vineyard-vines-shep-ian-murray-2015-11">What you need to know before going into business with family</a></h3>        <div>            <div>        <div class="ooyala-video-player" data-video-autoplay="false" data-video-id="9xamU0eTrNI-gkEQamqnQkyRu1mapqNP" data-player-variable="ooyalapopvideo" id="ooyalaplayer_popvideo" style="width:1280px;height:720px"></div>        </div>        </div>            </div>

You Searched For "Gavyn Davies" and got 5 results

ANALYST: 'Brace Yourselves, A Huge Week For The Market Starts In A Few Hours'

Joe Weisenthal

There's been a 'serious and dangerous' slowdown in productivity

Chloe Pfeiffer

Portugal Just Threw Another Dagger At Europe - And People Think We're Seeing Global Growth Crumble All Over Again

Joe Weisenthal

ALBERT EDWARDS: Bernanke's Easy Money Train Is About To Crash, But The Fed's Too Scared To Jump Off

Sam Ro

DRAGHI'S BAZOOKA: What to expect from the ECB's massive meeting tomorrow

Mike Bird

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