THE ROAD TO…WHERE?

The Leader spoke on the Ukraine crisis early this afternoon, some say in response to the criticism of what he said…or did not say…over the weekend.  It received even harsher criticism as a result.  He said nothing which was interpreted only by the American far-left wags as being a brilliant ploy of holding his cards close to his chest.  To be honest, he has few cards to play without the Euros who can't stand the guy and worst yet, don't trust him.  Nevertheless, there seems to be a growing thought that doing nothing can't be done and therefore one has to ask where this thing is going and what will be the repercussions to the increasingly integrated financial world in which we live.

From the standpoint of what this means Over Here, the announced plans of the Administration to essentially fund its domestic policy program through tax increases and cuts in the military is, I think, dead.  Congress simply will not agree to the former or support the latter in an increasingly (or so it seems) more dangerous global environment.  The U.S. response to Russia or the lack of the same will probably become a larger election issue which is now but four months away and could help to shape the congress for the next two years.  Should the Republicans achieve their goal of recapturing the Senate their will undoubtedly be legislative stalemate on all levels which some view as a good thing on issues such as financial regulation and of course health care--which I shall never mention again--leading to a possible roll-back on some of the legislative mistakes that have been made in the rush to punish that group of pariahs in the society formally know as bankers.  Then again, perhaps not.  I'm fairly confident of one thing, however.  The relationship between the U.S. and the Euros had better come out of this thing intact and hopefully improved or there is going to be some really tough sledding ahead in the near term.

Over there, individual domestic difficulties seem to be preventing a convergence vis-a-vis Russia--an understandable situation given what is going on.  The French, par example, announced today that the state of the economy was "un catasthophe" to the extent that Frankie's beloved 75% top tax rate was to be scrapped along with the 35 hour work week (bet that doesn't happen) in order to get the country moving again.  Perhaps scrapping Frankie might work even better but that's none of my business.

Over the weekend more information was released concerning the Banco Espirito Sancto. Luxembourg holding companies, multiple and interlocking loans, commercial paper putchases…and proposed payments thereof…and whether anybody in hell can explain what was going on.  It's not Portugal you see, but the issue being if here, where else in the continent that is one big Disney Land is this going on?  Of course the masters of obfuscation are the Italians…they have been the best at it for 700 years…so it shouldn't be long before questions start getting asked--again--about who owes what to whom and oh my goodness does this mean that the entire system is probably insolvent?  Well, yes, but hopefully the Italians will do what they have always done, keep their mouths shut and act like nothing has happened.  And you thought Omerta was just a Sicilian thing? My son, you haven't seen a thing until you visit some of the little shops in Milano, Turino and oh, let us not forget Vienna.  It's a good thing August is close at hand, otherwise we would have a lot to worry about.  But not until September.  In 10 days all of Europe will be on the road…to somewhere.