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Elections in France destroyed Merkozy axis of emergency annoucements that used to address each major market turmoil with fresh batch of summits and strong declarations that “this time the ultimate solution to all euro area problems has just been found”.

In effect, now we are entering another round of Greece’s induced turbulences in a much worse political environment than last year. Today if market crash, how long will it take for Hollande and Merkel to produce strong joint statement?

1. Any goverment turbulences in PIIGS are actually good thing, because both Papandreou and Berlusconi were worn out and unable to meaningfully contribute to solving eu-debt puzzle .
2. China will still be providing boost instead of drag to the global economy for foreseeable future.
3. ECB will eventually end eu-debt mess by using nuclear option of significantly extending it’s balance sheet.

The ultimate solution was supposed to be presented by 23rd, a week before this deadline it was postponed til 26th. Now, the day of summit is over and all they have is blah blah about how “significant progress has been made” and Sarkozy planning to call China tomorrow and ask for money.

That’s exactly what I expected. What’s suprising is that markets looks very patient.

Update: It’s seems Merkozy learned to manage expectations. First they significantly lowered them and after that they dumped 1.4 trillion number at the market. It worked.

http://www.c-span.org/Events/Bernanke-Discusses-Recessions-Lasting-Effects/10737424856-1/

In occupy protests the distinction is drawn between 1% haves and 99% have-nots, but let me focus on one of the processes that lead to current outset of discontent: generational transfer.

For more than one generation western societies lived relatively comfortable life thanks to rapidly piling debt. The lifestyle of generation was leveraged with debt burden that’s in now being forced on the children. All this was simply wealth transfer from the future to the present.

There were numerous wealth transfer mechanisms, most notably: keeping social security system based on ever-growing population while this assumption was already falsified, rapid assets appreciation (most notably real estate bubbles, present almost universally all around developed world), education system (multiplied effect of simultaneous diploma inflation and raising tuitions).

All this was kept in order by “end of history” narration, in which we live in the best of systems and there’s no alternative to current ineffective democratic mechanism (i.e. two party system in U.S. based heavily on lobbying funds) and economic model. But now more and more people starts to feel a little bit more powerful, a little bit more concerned and a little bit more angry.

27-Jul. I have been betting on Jim Chanos for a long time, but haven’t seen this is one then.

“We think it’s benign. But we just don’t know.”

Of course, guys, if something benign could got to your “secured” networks for sure there’s nothing more there…

As Jean Claude Trichet is leaving, I think about difference between his and Ben Bernanke stance on central bank’s role.

Even as eventually ECB began controversial (from classical, and it’s funny that by classical I mean pre-2007 I point of view) actions with its purchases of peripheral countries debt, the significant argument between FED and ECB is still there.

BB without much hesitation jumped into role of main actor in economy resuscitation even as there was obvious lack of cooperation from government policies - something that he recently started to lament on.

Meanwhile, JCT used every opportunity to highlight ECB independence in it’s central bank’s role and was very reluctant to broaden it’s role. Of course, the dual mandate of FED, which is not present ECB-founding law may be one of the reason, but for many central banks (e.g. polish) lack of precise formal mandate to support employment and growth wasn’t big obstacle when they considered non-standard actions and direct cooperation with governments.

So it’s not matter of formals but rather of convictions and understanding of central bank’s role in the economy.

Now ECB, that was often criticized over it’s being not open minded enough, is somehow a little bit vindicated by the view of BB once more arguing that government branch of policy must do more to promote growth as FED’s policy bucket (as well as it’s credibility) is rather exhausted. It’s probably one more type of moral hazard to have a central bank that thanks to it’s non-standard actions and compromises on it’s independence weakens government’s willingness to make tough political choices.