Monday morning quarterback

Waking up on Monday morning in Europe following the EU fiscal framework agreed to on Friday didn’t see Italy’s debt all of a sudden lower and didn’t see their economic growth rate all of a sudden quicker. Combine this with Moody’s saying they will review all their European sovereign debt ratings in Q1 ’12 and the Pres of the Bundesbank saying “the mandate for redistributing taxpayer money among member states clearly does not lie in monetary policy…Financing of sovereign debt thru central banks is and remains forbidden by treaty.” The calls for more ECB action doesn’t stop as everyone wants the quick fix of money printing. I emphasize ‘quick fix’ because none of the sovereign debt goes away when the ECB buys it, it just gets transferred. It still has to be paid back or restructured if it can’t be. Yields are jumping in Italy and Spain this morning and the Greek 2 yr yield, as we await the results of its debt exchange, are rising to a new high of 150%. Sarkozy, prepping himself for an inevitable credit downgrade said, “If they take it (AAA rating) away from us, we would confront the situation with cool heads and calm. It would be difficult but not insurmountable.” In Asia, the Shanghai index closed down for the 7th day in the past 9. While Nov exports rose more than expected, the gain of 13.8% was the slowest since Feb. Imports also rose more than forecasted. The Indian Sensex fell too after Oct IP fell 5.1% y/o/y, much more than the estimated fall of .7%.

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