HOIST WHITE ENSIGN

Very funny email from a Brit buddy responding to our Secretary of State's offer to straighten out the latest dust-up between the Argies and the Brits over the Malvinas if you're the former or the Falklands you are one of the latter. Ol' Hil can't seem to keep her mouth shut and has now thoroughly pissed off our last remaining ally in favor of the whack-job babe who is running this whack-job country...or so believes my friend. His suggestion was--until I straightened him out--to assist Mexico in recovering Texas. It took a bit but he has now shifted his support to the re-annexation of California...in the spirit of Anglo-American friendship. Let's hear it for the special relationship! Kiss me Hardy.

All kidding aside, however, and to follow on with yesterday's theme, not many people seem to be taking seriously the plight in which some of our states find themselves. California is a mess, New jersey is...well, New jersey and Illinois may be in the worst shape of all. I know it's a tough concept to get one's arms around, but the prospect of a default surrounding one if not more of these political is in fact quite real. Markets are funny things and in today's world the volatility surrounding events is like nothing previously experienced. Event risk of whatever nature can affect market movements in a split second irrespective of underlying soundness and in the cases mentioned soundness is not a word that immediately comes to mind. So I worry, perhaps too much so, but I worry.

More and more the end game seems to be a willingness to inflate ourselves out of the problem we have caused and subtle signals seem to be flashed coming from unexpected places such as the IMF. Today, the governors of the Bundesbank and the Swiss National Bank felt it necessary to speak out in forceful terms against an idea floated by the IMF that a bit more inflation--say, 4.00%--might be a good thing for Europe and for other places as well. I admit I'm a touch biased in believing as I do that there has never in the history of man-kind been an organization that was more useless in search of a mission and spent more money in that effort than the IMF, but the problem is they get press that is actually read. This latest attempt at becoming meaningful is especially dangerous as it plays right into the hands of politicians who will find ANY excuse to avoid making hard decision and adopting unpopular policies to bail out of problems that they created in the first place. Air cover from the IMF? A Godsend. Can a supporting article from Paul Krugman be far behind? Watch.

I'm also wondering how this Kabuki production called health care is going to resolve itself. I also wonder whether the markets, both here and abroad, are watching and waiting and if they care. I really don't know but the issues as to funding raised by Rep. Ryan at last week's dog and pony show and which remain unanswered by The Leader or anybody else for that matter will have an effect. I don't have an answer. If anybody has any ideas I think we would all love to hear them. The next few month are going to be facinating, not only here but around the world.

Later.