“It’s the end of the world as we know it and I feel fine”

“It’s the end of the world as we know it and I feel fine” say the French as consumer confidence in May rose to the highest since Nov ’10 as they welcome and get excited about new Pres Hollande. Also, the French 10 yr bond yield touched the lowest on record this morning. June consumer confidence in Germany held at 5.7, just .2 pts off the highest since Mar ’11. To the euro bond debate which is now taking on greater rhetoric with those with high bond yields wanting them and those with low ones saying no way, ECB member Weidmann, a German, said ‘it’s an illusion to think euro bonds will fix the crisis.’ He’s right as only debt extinguishment and economic growth can lead to a sustainable fix instead of the ‘buying time’ tools that have occurred to date. This said, back in Nov, the German Council of Economic Experts published a paper on a European Redemption Fund which would be a ‘joint debt vehicle,’ similar to euro bonds but would be temporary, ‘say 25 years.’ There is a story on BN that German political parties, including Merkel’s, will further study this. In Asia, the Shanghai index closed at a 5 1/2 week low and Japan reported a y/o/y CPI gain of .4% headline and .2% core, below the BoJ target rate of 1.0% and leading to calls in Japan for more yen printing.

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