On both sides of the pond. I sware, I never should have come back from a great birthday weekend. Over here, The leader is blowing more smoke than a 1850 steam engine while the Repubs seem to be steeling themselves for, well, whatever may come out of this if they don't get the deal they want. Both sides realize, especially after the 2010 elections, that the electorate has discovered the latent power it has always had whilst at the same time are very much unsure how to position for the end game to which this is surely going to come down. The Leader threw out the thought that Social Security might not be paid: an obvious trial baloon for his polsters. I'd be willing to bet that after they do their thing we will hear no more threats like that. In the meantime we shall await developments and see if anyone blinks.
Now, on the other side, the Euros have made such a meal of this situation in Greece and points west that there is now a very good possibility that a true EU crisis may develop and by that I mean a fracturing of the political and/or monetary alliance. As suggested, the French/German or was it German/French solution bandied around last week hasn't gained much traction and it was back to the drawing board over the weekend to try to thrash out a "voluntary" solution involving the private sector as the ECB is still in a tizzy about "defaults" and the effect that would have on its business which is a bit like worrying about a broken wrist when the femoral artery is severed. The ministers are now beginning to discuss a solution involving some of the very thoughts that have appeared on thhese pages over two weeks ago but to be honest, I'm afraid it's too little too late. Whilst all of this is going on, another realization is coming to the fore. Greece is presently being led by the youngest of the Papandreou clan who, over the past 40 years or so, effectively wrecked Greece with a committed socialism (it used to be communism but that's kinda on the outs right now) unmatched in Europe. Georgie is in no way intellectually committed to the type of reforms demanded by the EU and everybody is beginning to figure this out. So, unless the Euros bite the bullet and agree to effectively substitute themselves for Greece in the capital markets, turn out the lights, the party's over. And then.........contagion.
...Which unfortunately, really reared it's ugly head in regard to Italy. Now let's get something straight: Italy is no Greece and the history of Italy is one of a country whose financing demands have always been handled internally and are still, for the most part, to this day. But yesterday the spreads on Italian paper simply exploded forcing, it appears, the ECB and some of their friends (can you spell C H I N A?) to intervene before things really got out of hand. This of course results in the same problem: paper held by Italian banks must be marked down--or so the purests would argue--and we get into the same arguments that we have been having about Greece and which remain unresolved. Problems--except for Jaime Dimond who of course sees all this as a mess for the Euros not involving us. You might ask Jaime what his bank's stock traded to today and whether he still feels the same way. There's enough dumb out there to go around twice.
My problem is I have no idea on what to focus so I guess the next few efforts are going to be composed at the keyboard as events occur. Anyway, think about some or all of this and I'll be back tomorrow. Oh, as a final little zinger in this enire picture, the minutes of the Fed meeting of June released today showed considerable support for the concept of QE III. That meeting was of course before last Friday's jobs report which stank. I'm going to try to focus on what is the most awful at a point in time.
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