Courtesy of Mr.Bernanke we learn that 7 Fed governors are against rate rises before end 2014 / start 2015.That's a full 7 years after the start of the crisis. Yes , 7 years. More than a bit like Japans lost decade. Have to wonder what it is that the FOMC sees happening that requires rates to stay on hold for another 3 or 4 years ? Clearly they aren't forecasting a rebound in the €, muscular US jobs growth, or a decoupling of the US economy. Perhaps they're just trying to scare us and underneath it all they're more hawkish ?
Germany suggests that because of non-compliance a European Budget Commissioner should oversee Greek government spending . Athens huffily says ' thank you but no thanks '. It wants to retain its sovereignity regarding taxation and expenditure . This morning an announcement from Berlin that Frau Merkel will be actively campaigning for the re-election of France's President Sarkozy . She'll be seen " standing alongside him " . Quite how the Greek or French electorates will view this Germanization of their domestic political sphere remains to be seen. Reinforces my view that the real € crisis comes when the southern euroland states vote in 2013/2014. Of course the crisis could come earlier if Madame Merkels intervention fails to swing the election in favour of Monsieur Sarkozy . Mr.Hollande the Socialist candidate is already talking about renegotiating the treaty agreed at the last summit in December.
Interesting meetings in Switzerland earlier this week. Return with the feeling that politicians are still scrambling to catch up with the crisis. There is a danger in this. Social media is behind an attack on banks and bankers for having got us into this mess. Politicians are happy to leap on the bandwagon . '' It wasn't my fault " always an attractive position for the political class to take. But without the credit creation that banks provide where exactly would we be ? Where will we be as banks massively deleverage ? . Some hard socioeconomic questions will be coming our way soon . This week we learnt that Spanish unemployment is at 23% and rising ! Even more alarming , Spanish youth unemployment is at an astounding 50 %. Desperation levels.
The recent rally has started to run out of steam. 2011 earnings released over the last week or so are hinting that corporate margins are under pressure . Wall Streets brightest are waking up to the fact that growth is slowing, unemployment rising, and volatility is here to stay.On the positive side Armageddon has failed to take place and probably won't until 2014. November and Decembers market wide psychological depression has been replaced by a more measured tone. With the super cycle over governments will be forced into setting priorities within budgetary limits. This is a concept that is quite alien to any of the current batch of elected leaders. Reality will probably strike after the US election. Until then gold remains attractive on dips below $1700 and equities , despite an imminent golden cross, on a retracement towards 1280 on the S&P. Gilts remain the place to be .
Protectionism is the beast that could kill equities. There are signs that it's stirring in the runup to the US Presidential race. Time for a bout of China bashing ?.