Notes From Underground: The Success of any EU DEBT Relief program Rotates on a German Axel

Some housekeeping weekend news: British Petroleum returned to the Russian market as it announced that it was swapping $16 billion shares of its stock for an equivalent amount of ROSNEFT, rendering the Kremlin the largest BP shareholder. BP management has determined that its future is better off in developing large Russian oil reserves than depending on the capriciousness of U.S. ENERGY POLICY. This is not an easy issue as some previous aggrieved parties are going to slow this agreement down until they receive compensation for past illegal moves by the PUTIN clique. More importantly, it says that serious business people are beginning to see a change in Russia and want to be part of the early movers into the “great potential.’

Some U.S. congressmen are looking at trying to block BP‘s move by calling for an investigation by the Committee to Investigate Foreign Investment (CIFIUS) in the U.S. Representative Ed Markey, who is a noted sycophant of autocratic rule, is bothered that the BP management felt it had a better chance for energy profits in Russia than under the auspices of the EPA and other autocratic appendages of Congress that change the rules at the drop of a barrel of oil. Markey went so far to change BP’s name to “Bolshoi Petroleum.” Markey and others may have a static thought process but the world is far more dynamic than the purveyors of power on Capitol Hill.

Also, in a seven-answer op-ed piece in the WSJ and Washington Post, Chinese leader HU referred to the role of the U.S. DOLLAR as the world’s currency as “the preduct of the past.” Again, the world is in flux and as economic growth races ahead in the emerging nations, the nascent industrial nations are looking for a greater share of global governance. Many pundits in the west fail to see that the macro global environment has changed dramatically. The structure of colonialism is dead and those that lived under the dictates of a Cold War world want more than just a seat a the table. They want to rewrite the rules that aid and abet their development. The U.S. capitalist model has been badly damaged in the world’s eyes by the excesses of Wall Street. Let there be no doubt that it is not a Chinese leader coming hat in hand but rather President HU with a checkbook in his packet and a MOUNT BLANC pen in his hand.

The Bank of Canada announces it rate decision Tuesday morning at 8 a.m. and consensus is overwhelming that the BOC holds its overnight rate at 1 percent. The CANADIAN DOLLAR is very strong so the BANK may well hold rates, but I would not be surprised by a 25 basis point rise. Today, Canadian Finance Minister Jim Flaherty tightened conditions on household debt by raising the amount of money needed on housing loans and lowering the percentage that refinancers can extract from a home. The Canadian government is worried that the ratio of household debt to GDP is too high so they are trying to rein in the excesses. That is responsible leadership unlike a FED chairman who promoted the use of homes as a piggy bank while holding rates unnecessarily  low for far too long. I advise paying close attention to the BOC statement regardless of what moves it makes. BOC Chairman Mark Carney is  a very astute analyzer of the global scene so his outlook and words should be carefully weighed.

Last week, the EURO currency was the star performer as the European drama queens were again center stage for another DEBT crisis was momentarily resolved. Now that the immediacy has passed, the EUROPEAN POLICY MAKERS are back to business as usual. The Germans are backing off from “promises” of greater contributions to the EFSF as the political heat in Germany is turned up coming into February’s regional elections. Now that the crisis has receded, some of the PIIGS are also backing down from the intense austerity and searching for ways to bring their budgets in line without committing political suicide. The French leadership would like it if Germany would sign on to being a much bigger provider of funds to secure all EUROPEAN DEBT, thus resulting in a fiscal, as well as monetary union.

It is possible that the German citizenry would be a more ready provider if the ECB were to be lead by a GERMAN. If the European elites want a greater contribution from BERLIN, then it is in their best interest to cave in to Merkel’s wishes to have Axel Weber head the ECB as the Bavarian Burghers would sleep much easier. Stop the silly games that are reminiscent of the EUROPE of the past and let the Germans have what is most important to them: SOUND MONEY. Weber is a monetary HAWK of the first order and it would behoove all involved to allow FRAU MERKEL this victory. If Sarkozy and his fellow Europeans leaders can end the atavistic games of a bygone era, the EU could actually enter the 21st Century. If Axel Weber were to be named ECB president, I wouldn’t want to be short the EURO as it would signify that a compromise has been reached and Germany would be pledging more finances. That is, until the German Constitutional Court weighs in. C’EST  LA VIE.

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6 Responses to “Notes From Underground: The Success of any EU DEBT Relief program Rotates on a German Axel”

  1. Joe Says:

    U.S. Representative Ed Markey: Probably figures that the Caracas to Boston pipeline will always be full of heating oil.

  2. Danny Says:

    ConocoPhillips tried essentially the same arrangement with Lukoil in an attempt to gain access to Russian resources. It didn’t workout at all in terms of gaining traction or even a footprint in the Russian market. Thus COP sold their stake in Lukoil after it was determined to not be strategic given the lack of development in the relationship. Do you think BP will be more successful at getting a foothold in the Russian market? The deal still provides an indicator of positive developments in Russia…I just question whether BP will actually get any meaningful “on the ground” exposure in Russia vs. financial exposure via Rosneft stock.


  3. yra Says:

    Danny–they are certainly making a large bet fraught with risks—it will take a long time to tell.I also think that is getting more concerned about Nabucco and are looking to shore up their relationships—the time has come to end the actions of juvenile capitalism and put on a suit and get in the room—too much at stake

  4. Arthur Says:

    In the US, stock markets are very calm, prelude of a storm?

  5. yra Says:

    Arthur–have you having a Minsky Moment?

  6. Arthur Says:

    Fortunately not, but know many they have it. Wondering about global stock markets, too much calm. For example, the Spanish stock market is up! Don´t know, don´t know…

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