Whatever planet the world’s bourses are on, it isn’t Earth
President Obama yesterday declared himself still unconvinced that the EU’s leaders had got a grip on the eurozone crisis. The Wall Street Journal opined that ‘A flurry of meetings by global policy makers in recent weeks has done little to inspire confidence that a permanent fix is in store for Europe’s beleaguered periphery, and economic indicators in recent days have offered fresh signs that Europe risks sliding into another recession. France’s statistics agency Thursday predicted recession for Spain and Italy by year’s end, saying that would help drag France’s growth to zero.’ The Dow responded accordingly:
“This is the most serious financial crisis we’ve seen at least since the 1930s, if not ever,” said Mervyn King, announcing more QE for Britain, just before news leaked that RBS will need further cash to meet EU capitalisation regulations. The FTSE responded accordingly:
Following the bigwigs’ meeting in Berlin yesterday, the attendees emerged looking bored out of their minds, but declaring that there was more than enough money to solve the crisis. There wasn’t even a communique from the session, diplomatic code for “We can’t even agree about the new colour scheme in the European Parliament”. Injecting capital into Europe’s banks won’t provide the “silver bullet” that is needed to solve the crisis, said Huw van Steenis, a banking analyst at Morgan Stanley in London. It needs to be done in conjunction with measures to shore up sovereign debt, he said. “The banking crisis isn’t going to be resolved until the sovereign crisis is resolved,” said David Watts, a strategist at CreditSights Inc. in London. “Capital isn’t the way to go because the needs are too big and will weaken the sovereign.” The German Borse responded accordingly:
There was confirmation from Parisian sources last night that there is no common ground at all between France’s Nicolas Sarkozy and Germany’s Angela Merkel on the subject of capital injections into banks. Sarkozy nevertheless said he would discuss the issue of possible capital injections for banks when he meets German Chancellor Angela Merkel this Sunday in Berlin, by which he means ‘French banks’. It’s going to be a very short conversation. Bloomberg this morning confirmed that ‘Merkel has cited the need to prepare for the default that investors see as a sure thing. Sarkozy, whose banks have the most to lose, is unwilling to gamble on letting Greece go.’ The French bourse responded accordingly:
These snippets and charts show anyone even half-awake all the problems of the West.
The politicians are squabbling, and – in the eurozone – in complete denial.
The banks haven’t prepared themselves for Crash 2, having been bailed out by us after Crash 1.
And the schemes being bandied about to solve the crisis defy every law of fiscal mathematics.
But above all, the main method of raising finance for business – the stock markets – behaves as if new industries are coming on stream, business is booming, and everyone’s inflation rates and public finances are in AAA shape.
If the stock markets are so bent that big-trade directionalising can make sentiment look other than it is, then ordinary investors should desert them for good. And if these rises really do reflect majority investor sentiment, then the traders and strategists have clearly lost any feeble hold they ever had on reality.
In a vain bid to escape this double whammy economic wipe-out and insanity fest, The Slog is busy packing up to desert the sinking ship that is France. From here onwards, further posts will depend on the availablity of wifi, and whether anyone has paid their electricity bill. We will be back in Blighty at the weekend, for a Last Stand in the old redoubt.
The lighter side is, meanwhile, available at THE BIG TOP