The G-20 meeting in Mexico resulted in Chancellor Merkel being the PINATA for the other 19 guests as they beat her with the stick of moral certainty. U.S. Treasury Secretary Geithner and President Obama were adamant that it was Germany’s moral responsibility to capitulate and be the co-signer for the European Project and thus the global financial system. The onus was put on Frau Merkel to take the great leap forward and have Germany underwrite all the profligate programs of European nations.
THE QUESTION HAS TO BE ASKED: WHY DOES MERKEL HAVE TO BE THE SOBER LEADER IN A WORLD OF THOSE DRUNK ON EASY CREDIT? It is interesting that OBAMA FAILED TO LEAD ON BOWLES-SIMPSON AS IT WAS SLOUGHED OFF THAT THE DEMOCRATIC BASE WOULD NOT SUPPORT THE RESULTS OF OBAMA’S OWN COMMISSION and YET IT IS MERKEL WHO BEARS THE ONUS OF MAKING THE POLITICAL SACRIFICE? AND THE COMING U.S. FISCAL CLIFF, WHERE IS THE IMPETUS FOR LEADERSHIP FROM CONGRESSIONAL REPUBLICANS AND DEMOCRATS?
The world’s financial kingpins are all crying for Germany to lead and do the correct thing to save the global financial system, but again, there is no shared political sacrifice! The markets are all TWISTED as rumors fly about whether MERKEL WILL OPT TO SAVE THE GLOBAL CAPITALIST SYSTEM BY AGREEING TO EUROBOND FORMULA BASED ON A FISCAL UNION. As the old commercial goes: WILL SHE OR WON’T SHE, ONLY HER FINANCE MINISTER KNOWS.
It is interesting how Geithner wants others to take the political risk allowing others a free pass. George Soros has another piece in the Financial Times today, “How To Shift Germany Out Of Its ‘CAN’T DO’ MODE,” in which he tries to craft a plan for MERKEL and Germany to follow, calling for a EUROPEAN FINANCIAL AUTHORITY and BANKING UNION and delaying the need a greater political union.
Soros believes that it is paramount for Germany to accede to the demands of Italy and France for less austerity and more growth, otherwise Germany will wind up with itself as the “CENTER OF AN EMPIRE AND PUT THE PERIPHERY INTO A PERMANENTLY SUBORDINATED POSITION.” He goes on to say “THAT IS NOT WHAT MS. MERKEL OR THE MAJORITY OF GERMANS STAND FOR.” This is a problem, for too many people all think for the Germans while then letting the GERMAN GENERAL WILL SPEAK FOR ITSELF. THIS IS WHY THE MARKET IS CAUGHT IN THE CROSSFIRE OF POLITICS: A fragile global economy and the failure of politicians to lead.
***QUICK HITTER: There was a WSJ article today discussing Japanese auto makers shifting more production out of Japan because of the strong YEN. This morning in Europe and the U.S., the YEN was strong as the JAPANESE DIET moved to raise the Vat tax. The market is looking at the sales tax as being a strain of the economy … again. However, it may mean that the BOJ and MOF may move to weaken the YEN as a counter move to the INCREASED TAX TO IMPROVE THE BUDGET SITUATION. A weaker YEN would stimulate growth and may be a quid pro quo to the fiscal conservatism of some Japanese lawmakers and BOJ policymakers. Hey, how about buying some EUROBONDS IN A COORDINATED GLOBAL EFFORT?