SPOOLING UP

As funerals go, it was spectacular but now that we're back, I have to start spooling up as to what has happened over the past week or so.  At first glance, not very much, but two things stand out as becoming bell weathers as to future conditions.

The first is the price of oil which took a huge jump on reports that there was to be a deal between OPEC and non-OPEC producing nations to reduce production thereby setting a floor on the price.  You might remember that it was predicted here that would not happen and sure enough, the Saudi Minister threw ice water on the report saying in no uncertain terms that such a deal was not on.  Surprisingly, oil rallied today even in the face of higher inventory numbers pulling the DOW out of a 268 point hole, but I suspect we will see it drop again shortly.  What is surprising is how everything turns on the price and how little talk there is of this market, if not being outright manipulated, is being massaged by some professional leakers of information and an all-too-gullible press who seemingly will print anything without out much verification whilst knowing that in times like this any rumor will move markets.

The second event is the becoming-more-real possibility of a British exit from the EU.  Last week, Boris Johnson, MP, Mayor of London, Impregnator of various women not including his wife, and either beloved or be-hated, announced that he was for Brexit.  Whilst commentary focused on why he broke with Cameron (hint...he wants to be the PM), little was made of the effect this stance would have.  Within days, he was brutally attacked in the Commons by Cameron and as we look today, the Pound closed at 1.39-something having traded to 1.38 earlier in the day.  Oops.

For a variety of reason, some of which are political, the Bank of England will not prop up the currency but it's continued weakness will give even greater fear to a "yes" vote for Brexit.  Boris has a following:  from an American's standpoint (he's American as well having been born in New York) he looks for all the world like a Donald Trump in the making.  That really isn't the case, however, but he surly is making life difficult for the "establishment politicians" and sending shivers up the spines of more than a few on the Continent.  Imagine, a Yank, running Britain?  And then, there was Winston Churchill.  Best watch this thing develop.   As usual, never a dull moment with the Brits.

A NEW DAY IS DAWNING

An apt line from the hauntingly beautiful "Cats" from the musical of the same name might best describe the situation in the UK today.  My friend, Gordon, said it best and I don't think he will mind if I quote him a bit.

"You cannot imagine the political earthquake this represents.  People normally completely uninterested in politics are dazed.  It will be a decisive five years.  Labor lost to the right in England, and to the left in Scotland.  By the time they figure out which way they are facing, it may be all but over for them."

Mind you, this is in a nation where two dominant political parties have shared rule for nearly 200 years, far longer than the Dems and the Repubs Over Here.  In speaking with a number of Brits this weekend there is a certain amount to fear of the unknown given the extent of the political slaughter which took place.  The Tories have it all and given the speed in which they have reorganized the entire government they are well aware of what lays before them.  Yes, the SNP will be pests from the git-go, but there now exists no real organized opposition.  UKIP won only one seat but got four million votes...twice the number of the SNP.  Their showing in the north was particularly strong, displacing Labor as the number two party in many districts.  Yes, they are anti-Europe but more than that as well as they are attempting to appeal to the working man as the alternative to Labor.  The next big issue will be whether they can do that to any extent or whether they will simply fade away as a choice for only a moment in time.  If they succeed, the world will once again be turned upside down.

Of course the Tories will have to deal with the "Scottish Question" as it is now being called.  At the end of the day, however, 56 seats doesn't scare anyone especially with Labor in tatters and a considerable increase in home rule will probably be granted but with that will certainly come a reduction of the dole passed up north with which the English had reached the point of disgust.  It was no small point in the Tory victory.  The choice will be made clear; more independence or the cash?  And next comes the issue of Europe.

Cameron has promised a referendum on continued membership in the EU by 2017.  He will keep that pledge, but before so doing he will attempt to renegotiate the UK position within the body from the standpoint of enormous domestic political strength.  Enough has been said lately as to importance of maintaning Greece as a member; the thought of a Brexit would surely raise concern to the state of paranoia for there is considerable agreement that without the Brits the Union would cease to exist.  To be honest, there is probably more support for remaining in Europe--even among the Scots--throughout the UK than to leave but Cameron, who has proven to be not only a cunning politician but a brutal one as well, is certainly capable of keeping the opinion polls on a knife's edge as the moment becomes closer unless he gets the sort of deal from the Euros that he demands.  My bet is he will.

In the end, this election may well be the precursor to the American election of next year.  The differences in political philosophy Over There can be boiled down to the contrast of big government, social spending and higher taxes vs. limited government, fewer regulations, lower taxes and a rejection of the European nanny state...just like Over Here.  Oddly, the players were even the same, with Labor relying on the economics of Paul Krugman and uncle Joe Stieglitz and the political acumen and class warfare of David Axelrod who was paid over $500,000.  They were soundly rejected but the battle will be joined again in a year.  In the meantime, the UK will provide an excellent test tube for the continued experiment of Mr. Cameron's policies which can be equated closely to those of the more centrist wing of the Republican party who will certainly be cheering him on.  A new day begins, the dogs bark and the caravan moves on.  Only this time the destination is not yet known.

Greece paid the IMF today...a day early.  They are lighter by 700 million.  Nothing has changed.

Correction:  The level of employment in the work force dropped below 64% not 70% as had been stated.  My apologies for the error.

THE LAST BELIEVER?

Writing about the travails of Europe he past few days one thought kept pooping into my head.  Is there anyone left who truly believes the monetary union can succeed?  Draghi of course comes to mind  but looking at his pronouncements and actions (or no actions) of the past few weeks I feel more and more that the guy has given up the ghost and is merely going through the motions.  He looks tired, sounds beaten and by any form of judgement, faces an almost impossible task.

The continent is broken.  The gulf between the creditor nations of the north and the debtor nations of the south is widening.  In December, Spain fell into recession whilst Germany continue to grow with an unemployment rate falling to 5%.  The Euro has fallen to its lowest level in years which only increases Germany's export position and noes nothing for the south whose economies become more and more internalized and who's indebtedness inexorably grows faced with an inflation rate in the negative range.  The 10 year Bund yields below 0.50%; the 5 year actually traded to yield in negative ranges today pulling down yields in Italy and Spain to be sure but that is meaningless in a no growth, no inflation envirorment.  It is clear, now, that China has massively over invested so no help there and even the stunning decline in energy means little.  Sr. Draghi may have reached the end of the road.  More importantly, he may now be prepared to accept defeat.

Oddly, German prospects, may also be facing a reversal.  Over the past year, German exports to Europe have experienced a little noticed change.  The market for German in now the U.K., not the members in the EMU as has mostly been the case.  Angie landed in London today which is hardly a coincidence and what comes out of this chin wag may have more importance than people realize.

Cameron needs help.  The up-coming election is far from the sure thing that many commentators, including myself, thought it would be a year or so ago.  The result is in no man's land, and yet it is not altogether clear what Ms Merkel can do to move the momentum in Mr. Cameron's favor.  However, one thing she must understand the one thing Mr. Cameron can do is to make good his threat to take the U.K out of the EU.  That would probably  result in his victory and write finis to the great experiment.

I have more thoughts on this overall situation but right now my eye sight is giving way.  Forgive me, but I need to close and return after a bit of rest.  Stick with me.

THE FAT IS IN THE FIRE

What began as a civil but important discussion as to the governorship of the EU between David Cameron and Angela Merkel has gotten a bit ugly in recent days and today has emerged with dissenting positions fully expressed and battle lines drawn.

This all started over who would be the new President of the European Commission and came to a head when Cameron flat out rejected Jean-Claude Juncker, the former PM of Luxembourg said to be the choice of Ms. Merkel.

Frankly, I don't believe that Mr. Cameron has any real objection to Mr. Juncker other than perhaps what the hell sense does it make having a guy from Luxembourg guide the show, nor is it personal with Ms. Merkel, but when the most recent elections across Europe have indicated a far more nationalist fervor having what is a faceless bureaucrat as is Mr. Juncker  the face of European Unity is probably not the greatest idea anyone has ever had.  Further, the natural suspicion on the part of all that Mr. Juncker is German in name and in all other things that count further inflames the north/south division and raises new suspicions along the lines of he being merely a front for German interests.  Suspicion and distrust are at an all time high Over There.  And so, Mr. Cameron has a point but what really got things going was his not-so-veiled-threat that give us Juncker and we walk which Angie took personally and let THAT be known to all and sundry.  Angie's List of candidates is to be taken seriously.

Well just hours ago, David came up with his own pick, none other that the PM of Denmark, Helle Thorning-Schmidt, she of selfie fame with The Leader at the funeral that was reported to have put Michelle ma Bell's knickers in a twist.  Why?  Haven't a clue except for the fact that she is apparently well-liked and is…oh hell, she's really good looking and that still counts for something, especially Over There--and here too except we will not admit it.  When I heard that news I said, "Hang on, is there some other connection," and called a bud in London to check on it.

Turns out that Madame PM is married to none other than the son of Neil Kinnock (now Lord Kinnock), the former head of the Labor Party, union head-knocker, rabble rouser and all-around jerk...IMHO.  My pal is as mystified as am I as to whether there is some deep, dark collusion going on but the place is beginning to more and more resemble the Europe of 200 years ago when every ruler's half-wit son was married off to some non-descript daughter of a possible enemy to prevent a war or to the daughter of the ally to reinforce the peace.  Europe over the years had so much in-breeding that webbed feet began to pop up.  Anyway, we shall see how Angie deals with this one but David is playing what has suddenly, because of the surprising strength of the British economy, a rather strong hand--especially that if there were to be a referendum, everyone recognizes that the Brits would be gone.  As I have said before, I don't believe the EU could survive that event.

Overhanging all this are two events of importance.  The first is the downgrade of the world's economy by the World Bank which is taken far more seriously Over There than Over Here.  The second are the recent events in Iraq which seems to have raised a few issues in The Leader's contention that Al Qaida is "on the run."  Suddenly, all bets are off as to this part of the world and it's energy supplies that, if affected either in availability or price will clearly have a negative effect on the world economy.  If there is any humor--dark or otherwise--to be found in all of this it has to be the State Department spokes-person, a blond possessing the arrogance of only the truly stupid responding to the question is the fall of Mosul a major even with, "I don't think so, there's not a lot of land involved."  Of course to reporter never thought to follow up with, "Would your response be the same if Chicago were to be overrun?"  We may be doomed.

A WEEKEND IN THE COUNTRY

PM David Cameron und Frau flew off to Germany this afternoon for a weekend with Angie und Herr Merkel just to show how close are not only the two families but the UK and Germany as well.  Yeah, right.  Fact of the matter is the meeting highlights just what the desperate state of play within Euroland demands at this moment and whilst time, effort and attention are being spent on the Cypruses and Portugals of this world, the real drama is probably having it's opening act just outside of Berlin this weekend.  More and more it seems to me that the future of the Union, if there is to be a future, will rest upon whether the very real disagreements and differences between these two major participants can be resolved in the face of a British public which is less supportive as each day passes and the German Volk who are increasingly vocal as to whether Germany would be better off out rather than in.

A colleague of mine once said a while back that the Brits have lost all of the superiority they once had except for the complex.  Still apt today I think but Mr. Cameron does have at this stage a much stronger political hand to play than does Frau Merkel, although heaven knows that the situation could change in the bat of an eye.  Problem is (at least to me), I've never much trusted Mr. Cameron and I have no idea--and I suspect neither does Ms. Merkel--what sort of a game is going to be played.  Has Mr. Cameron made within his own mind a committment to Euroland?  Has he decided to work for a clean break?  Or is his decision to be simply a political one: hold up the wetted finger and see which way the wind is blowing?  Perhaps we will have some better idea after this weekend but I think, unlike the Majority of Euro pundits, the course of action will occur within a year and if Mr. Cameron decides to in fact put the vote to the British people, they will write finis to this bold and if I may say so, mad experiment.

Anyway, while this is going on the truly terrible state of affairs surrounding Cyprus, Portugal and surly to come, Slovenia is becomming more and more apparent even with an extention of terms being granted to Portugal and Iceland (remember them?) in their restructuring transactions insofar as to repayment which will change nothing as it never has unless the economy of Euroland picks up rather dramatically...which it will not.  On top of all of this Monday is the 15th. and I have to pay taxes.  I hate paying taxes to this particular bunch of  numbskulls that run our government.  I have a feeling that this is going to be a miserable weekend all over the place.  Then again, perhaps I'll be proven wrong.  It's happened before...no kidding it really has.

OH, WHAT A LOVELY WAR

...and the Brits won it!  After an all-nighter, David Cameron emerged victorious having convinced the leaders of Euroland to cut the EU budget for the first time in history.  Unlike some famous battles in the past it was the Brits and the Germans alligned on one side against the French which, if memory serves, last occurred in 1815...but then the Germans were on any side that paid them.  How much was involved?  Not very much to be sure and it is a multi-year budget running until 2022, a "forward looking" budget according to Harry Von Rompuy the EU President (as opposed to a backward looking budget, Harry?) and with that time frame a lot can change.  But it was important for two things: it was a huge political victory for Cameron both in Europe and at home and if anyone was in doubt as to who mattered more as between Frankie and Angie, that doubt was put to rest.  It just might keep the British in the Union as well...no little thing when compared to the prospects of just a few short weeks ago.  Now the European Parliament can veto the entire thing and there are quite dumb enough to do just that, but I suspect that the Cameron view will prevail even there especially with Angie firmly on board.  Quite a result indeed.

Overshadowed by all this was the decision by the assembled to move forward with the exploration of trade agreements with both Japan and the United States which IMHO is a good deal more important than the above but which, certainly in our case, is probably going to be a long time in coming if it comes at all.  If Von Rompuy though he was, from time to time,  having a bit of a bad time with Cameron wait until he starts dealing with The Leader where I suspect he will find a distinct lack of interest and an attention span some what shorter than that of my late, beloved Wheaten Terrier.  Then again, she was a very bright dog.

While that was going on we now have a wonderful little currency war shaping up all around the world.  In response to Draghi's comments the other day that the strength of the Euro might be a real drag on growth in 2013, Japan took the hint as its finance minister today suggested that the devaluation of the Yen might have gone a bit too far and we really don't want to allow this to get out of hand do we Draghi-san?  I would hate to be an FX trader today.  Euroland has clearly been hurt by an exchange rate what with all the upset still closed at 1.33+ to the dollar today.  Problem is everyone is chasing each others markets including the U.S. whose trade deficit by the way narrowed sharply last month.  Checkbooks at 20 paces!  Problem for everyone is that Mr. Bernanke has the biggest checkbook in town and a singular mindset to prove himself to be correct.  It could get ugly.
Then again, a goodly part of our Balance of Trade is Oil and we are awash in that commodity at this stage opposed to past years which may well mean that despite what people may wish to do on a currency basis, we are seeing a significant and perhaps permanent shift that may not be affected in any scenario.  Interesting stuff I think.

Finally, three cheers for the Irish who apparently have convinced the ECB that a restructuring of their obligations owed to the central bank was in the best interest of all parties.  It appears that the ECB has agreed to exchange high-yielding short term obligations for debt with far longer maturities with a greatly reduced interest rate...something I might add that they have been loath to do as Ireland is not the only member of Euroland  that are in to them for a bob or two.  In exchange, Ireland will immediately liquidate Anglo-Irish Bank (what they should have done four years ago) and promise to sin no more.  So now the precedent has been set and principal compromised.  It will be interesting to see who is first in line to cut other deals with Sr. Draghi who, incidentally, has yet to comment on this one.  It will be a lovely little...war?



Yes, Carter, it was the Times...days late as usual

THAT TIME OF THE YEAR AGAIN.

Mid January means it's Davos time, that ego-serving, outrageously expensive, complete waste of time to which every CEO of a public company who attends should be immediately fired by his/her board of directors if they have any regard for the well-being of the share holders.  You could put a serious dent in world poverty if you applied the waste of this week in an effort to distribute some food.  But every once in a while something quite out of the ordinary occurs which gives, for a fleeting moment, legitimacy to the whole, sordid affair.

Yesterday, British PM David Cameron delivered perhaps one of the most important speeches heard in Europe in the last 50 years.  It was entirely political and aimed not only at his fellow leaders in Euroland but especially at the voters back home.  The PM is facing some tough battles:  A referendum later this year as to whether Scotland remains part of the UK or fulfills the dream of Robert the Bruce and becomes an independent nation.  He sits at the the head of a divided conservative party with the very real chance of having to call an election if things go just a bit out of kilter, and finally, the direction in which the EU appears to be going is not one that he can support on behalf of his electorate.

Cameron indicated that he had the willingness to stick with the EU but under far less restrictive membership that has been proposed.  But most strikingly...and some would say shockingly...he made it quite clear that unless accommodation is reached he was prepared to put the question of continued membership to the British people in the form of a straight up or down referendum later in the year.  Phrased in that manner, there are few who doubt that the result would be for the UK to withdraw.  Few suspected that he would announce such a bold plan, brilliantly delivered, or so I am told by an old friend, a British diplomat who was present.  Undoubtedly, this has solidified his position within the Conservative Party and has put a very large cat among the pigeons of the EU leadership to the point that Angie wasted no time in announcing that she was more than willing to discuss the UK's concerns at an early date.  No word on Frankie but I doubt he received this well.  Unfortunately, the poor guy's got himself in the middle of a war in Africa and is probably screaming mad that Cameron pulled this off whilst he was otherwise pre-occupied.  Pure speculation on my part by the way.  In any case, this is a very important event and now that he has let his intentions known in regard to a referendum, Dave's next act is going to be keeping the back-benchers in place for surely the cry will be, "Bugger the rest, referendum now!"  A high risk strategy indeed.

Among the common man group, Jamie Dimon waxed poetic about bank regulation today and we'll talk about that a bit tomorrow.  But under the caption of "You Can't Make This Stuff Up,"  came the announcement today the the chief actuary for Greece had been arrested for producing budget deficit numbers that were too high thereby, "thereby doing damage to the Greek State."  The reason?  Simple really.  It was to insure that the size of the bailout from the EU could be justified.  Greece, which got itself into trouble by submitting deficit numbers that were too low has just done a 180 and probably gotten half of Europe enraged at them again.  Really, You Can't Make This Stuff Up.

PREDICTABLE

The Greek Parliament approved the Euro 13+ billion austerity package late last night but with considerable pain.  The vote was 153-147 with a number of ministers in the ruling coalition voting against the plan who were then promptly thrown out of the ruling body.  The result was predicted but not the blood spilt...in the chamber that is; no one seems to care much what was going on with the thousands of rioters outside.  Well perhaps that is too harsh but there is another vote on Sunday as to the complete budget and while the predictions for this are also for it's passage, the events of the past few days makes this one more iffy.  Following the vote it was announced this morning that the unemployed rate for those under 25 was 58% and overall 26%.  That is truly quite astounding  and clearly dangerous.  Given numbers like this and the dissent in the ranks it is hard to imagine this coalition hanging together for very long and if it falls a new election will surely bring into governance the parties on the far left.  Game, set, match at that point.  Sunday is going to be interesting.  Nevertheless, the Greeks will get there money by hook or by crook and thereby avoid default later in the month.

While this little drama was being played out, Angie and David had a lovely dinner at No. 10 and Angie told David that Europe without the UK was unthinkable.  Right, says David, you lot forget about an extra billion for the fat cats in Brussels and about that universal financial governance, you can have it if we have a veto and we stay.  Whether dessert was served before Angie's departure remains unreported.  To be remembered: the Brits HATE Brussels as well as those who there reside.  Apparently, in honor of his guest the PM commissioned a poll, revealed this morning, that had 49% of all Brits ready to leave the EU NOW!   What a host!  I'm beginning to think this thing is real. At the same time the Old Lady and the ECB announced that they were holding rates steady which for the UK means QE is pretty much over.  Sr. Draghi also made it clear today that he was pretty much done talking about Greece and Spain, for as far as he is concerned it is now purely a political matter.
In that regard, Spain had a pretty good auction today across the maturity spectrum even selling about 700 million in 20 year...at a yield of around 7%.  I would call that fulfilling a special request and in these times it's good to keep your friends even at the 7% level.  Next stop, Greece on Sunday.

Everyone was quiet over here as the markets began to digest the results of the election. The talk all centered around what compromises will be made and by who to avoid fiscal catastrophe come January 1, but not many answers were given.  The equity markets sold off big time again which makes me believe, although as I keep saying I know nothing about equities that this is turning into what amounts to a major repricing of risk to the upside.  Not good.  The Suit is gone at the end of the year and if he is smart, The Leader will announce his new choice for Secretary of the Treasury sooner rather than later.  It would appear that the People's Choice is Erskin Bowles which IMHO would work.  If he chooses one of the inner circle...well, just let's say I wouldn't be long much of anything.   Next week I hope.

I'm off tomorrow to do some pro bono lecturing in the am and unless there is something REALLY important I'm taking tomorrow off and resting up for a big weekend of college football, noon to midnight on Saturday.

A REALLY BAD DAY

I you are an investor in world stock markets that is.  The Leader was reelected rather easily which was a surprise and as a result the DOW closed down 312 points.  There was an attempt to make it appear that the real movement from a flat opening was the bad economic numbers out of Euroland, an argument that certainly lost its creds as the day progressed, but actually in the medium term it is Euroland that may be the more important of the two events as rather than the usual suspects it was Germany's economic performance which fell sharply among all the other bad news that  caused the greatest shock.

I think this should be viewed carefully in two respects.  Germany was of course the key factor affecting all the other economies in the zone but perhaps even more important is that Angie is now in a box: whatever flexibility in dealing with the debt crisis is I believe is gone.  The mood will certainly shift to one of Deutschland uber alles as opposed one of Euro cooperation by way of leadership and sharing of the wealth.  German capital in bail-out mechanisms just got a lot harder to obtain.  Which brings us to Greece which was supposed to vote on the new austerity package today at 2:00 pm local time.  Then the riots broke out involving some reports had it at least 75,000 people in the center of Athens.  As I write, it is now 1:00 am in Athens and I have still not heard as to whether a vote has been taken.  I assume it has not.  Unfamiliar as I am with Greek parliamentary procedures I'm not sure what this  means other than in most places it would signal that the leadership doesn't have the votes.  If this does not pass I cannot see how this can be put back together in time for the latest tranche of the bail out package to pass which could result in a Greek default in less than two weeks.  If that happens...

In the mean time Angie stopped into No. 10 to have a bit of a chin wag with her pal, David.  Given the fact that in my book the odds of holding things together suddenly just went from about 90% to about 50/50 the conversation may be about nothing at all as there may be no Euro Union in which the Brits can remain attached.  That may indeed be an overstatement but there has been such a sudden shift in sentiment for the future that it may not.  Focused as we have all been over here on the election a lot of folks haven't been paying too much attention to the event in Euroland and today's goings on have come as a bit of a shock.  No doubt there will be an overreaction but our friend across the pond had better lay this one to rest quickly before the global sell-off broadens.

And as to the election, from a banker's standpoint the victory in the Senate Race in Mass. of Elizabeth Warren is the scariest thing imaginable.  The general view is that she's a one trick pony, determined to squash the financial industry in general and banks in particular with thousands of pages of regulation even stupider than Dodd/Frank.  Could be but then again she has earned millions in representing financial institutions in regulatory matters.  From my stand point I hope her ambitions run up against the Wall Street money raising sensation, Chuck Schumer.  Settle it fair square, Lizzie and Chuckie.  How 'bout a mud wrestling contest in Battery Square Park?  Hell, you could probably sell enough tickets for that to pay off the national debt which incidentally is now in the area of $16,000,300,000,000.  Greece?  What, us worry?

SNIPPITS

--There is a famous film of the great American football coach, Vince Lombardi, looking out across the field and asking, "What the hell is going on out there?"  At 9:00 am this morning the Greeks let leak that they had received a two year extension by the Troika for the meeting of their financial targets and their-agreed fiscal plan.  About 11:00 am Reuters, the original publisher of the leak, began to question its veracity.  By 5:00 pm the Greeks were denying that any extension had been granted and the Troika indicated that Plan Greece had not been accepted.  I can just hear Vince yelling, "What the hell is going on out there?"  Beats the hell out of me, Coach.

--Continuing to be in the role of the uninvited guest, David Cameron today announced that the UK would veto the proposed increase in the EU budget.  What! A mere 11% increase in the amount of money that a bunch of professional politicians in Brussels could spend on themselves?  Surely you jest!...Apparently not as the ol' boy was joined by the Dutch.  And one wonders why things don't get done.

--Mario Draghi spent a number of hours trying to convince the Bundestag that spending all the money in the world to bail out everyone and everything in Euroland will not be inflationary in the long run.  Little Paulie Krugman could be heard cheering in New York but apparently a number of German politicians wandered out of the get-together in a move interpreted as they not being convinced.

--As more and more people begin to look at the true state of the Spanish banking system, there appears to be a growing concensus that what the government has said is need to fix it...i.e. in recapitalization...may be a number whose basis is firmly planted in thin air.  And where have you heard that before I humbly ask?  Slowly yields rise once again and I suspect will continue to do so.

--But there is a saving grace.  I have it on good authority that someone high in the German Finance ministry let it slip that there are times when the fiscal detectives must be aware that their efforts at finding a solution may be subject to political realities and timing.  When are those elections? Next October?  You mean we have another year of this nonsense?   What the hell is going on out there?

QUICK TRIP

Angie's back.  Told the Greeks she loved them; blah, blah, blah.  Told the Greeks they had to implement their austerity package quicker; blah, blah, blah.  Official Greeks told her they loved her too and would try to do what she wanted; blah, blah, blah.   Out in the streets, unofficial Greeks told Angie to get...oh well, nothing is gained by this.  Angie left.

Meanwhile in Luxembourg, all the foreign ministers sat down to break bread and actually announced something interesting.  It seems 11 of the countries announced their intentions to install a financial transaction tax by next year as soon as there is full agreement and the protocols get signed. All of the UK lept for joy as did the remaining 16 as visions of off-shore havens danced in their heads.  Despite pretty much consensus that this isn't the greatest of ideas, the idea implanted in the mind of a politician of another way to detach a citizen's money from it's ownership and ship the same to the state is irresistible.  Led by the French, this has always been the club to be used to get the Brits to toe the line and whilst unsuccessful in the past they continue to battle with the same weapons on the same battle field.

It strikes me that the French should spend a bit more time listening to the sounds about them instead of themselves.  In case they missed it here's a clue:  Euroland is not in the best of shape as of this moment.  In a few months Greece will be gone showing the unthinkable can happen.  Portugal may be next and whilst these are not real countries in the context of this discussion, the UK is and sentiment against a closer union within the UK is more negative that ever.  Indeed, in comments just in the past few days, David Cameron hinted very openly about HIS Euroland and the other.  The visions do not merge.  Then again, the French were never very good listeners, sort of like Americans in one sense.  In their case, I think it may be a language thing, n'est pas?

Over here, it's the election, only the election.  I'm dead.

SANGUE PER SANGUE

TThere will be no meeting of the finance ministers tomorrow so I was half right.  There will be a meeting of the heads of state so that some completely useless but high-sounding communique can be issues because they have to say something as silly as that sounds. Given what occured over the weekend it might be interesting to watch the goings-on because it might turn into something like an Israeli parliament meeting and an actual fist-fight might break out.

I must admit, for the first time I'm beginning ro get worried not because the facts have become any different but because of the rhetoric which reache a feaver pitch on Sunday with Burlesconi being called out and insuted by Sarkozy and Angie and Frank telling the British P.M., David Cameron, "You have missed an excellent chance to shut up."

Politicians of all stripes have huge egos (The Leader being an exception as he is nothing but ego) and it is therefore not a particularly wise thing to do to tell one's peers to shut up or how to run his country but that is exactly what happened.  The fact that most of this came from the little popinjay Sarkozy made it even worse as there is wide agreement that he is the dumbest guy (or girl) in the room.  In addition, the fact the Mme. Sarkozy is a hell of a lot better looking than Burlesconi's once-17 year old girl friend even made things worse if I know Italians.  The meeting disolved into a shouting match and obviously things have yet to calm down, hence, no concrete action on Wednesday.

I tell this tale not because in the long run this incident will be the deciding point but because the well is now poisoned on a personal level and that makes agreement even harder.  In addition, while a British P.M. is used to being insulted in public as are his political colleagues, they take badly to this occuring at the hands of a fro...er...Frenchman, they react badly.  Mr Cameron had to resist and turn back a very strong demand from members of his own party to call for a referendum on Britian's continued membership in the EU which would surely result in a demand that Britian depart.  Whilst not a killer, that would be a devestating blow to the Union.

Sarkozy's actions are clearly the result of the shades being raised on the state of his country's credit and in particular on the state of the French banking system which is now being exposed as having done nothing to get it's house in order for the past three years.  Keeping in mind that the present head of the IMF, Mme. Lagrande, was the former French finance minister and in that role responsible for the condition of the banking system, the IMF is now seriously compromised.  Today, The Suit, who in the recent past had always made warm, fuzzy noises about helping out particularly through the good offices of the IMF, started walking back that cat now that things were getting ugly.  Sarkozy is desperate in the sense that he is way behind in the early polls and must protect French assets in the game if he has any chance at all of holding on to the Presendency.  Obviously the leaked number of 108 billion Euros of new capital believed to be needed is based upon only what the remaining Euros will pony up  in any sort of recapitalization plan which will not go very far, meaning France will have to come up with a lot more on its own for its own banks, which means bye, bye their triple-A rating which means...oh why bother.  The fact is NOBODY knows what's needed because there has been no agreement on a figure of debt relief for Greece, and Italy has to be delt with first which translates into Burlesconi and his party (coalition?) must do what Merkel and Sarkozy want him to do.

That the Euros have cocked this up so badly almost defies belief.  Greece is rapidly becoming an afterthought and more and more of this drama's happy ending has been placed upon the badly maligned  Burlosconi to do the right thing according to the maligners.  Will he?  We shall see.  Oh, by the by, for the non-Italian speakers out there:  Sangue per Sangue?  That means blood for blood.  Italians are very serious about certain things.