Notes From Underground: Canada’s government is a fallen angel while Merkel’s CDU suffers a severe setback

The weekend news was not economic but political as governments all over the globe suffered major setbacks. The Liberals secured a “NO CONFIDENCE” vote in the Canadian Parliament and bring down the Harper Government. I know that Michael Ignatieff will claim that he is perserving the democratic basis of Canada as the ruling party was brought down on an issue of CONTEMPT. The only thing that appears contemptuous is the ego of Ignatieff. He claims that the TORIES are out of touch and out of control. The election is called for May 2 and then the electors will have the final say on who is out of touch. This will be the fourth general election in seven years and let’s hope the citizens of Canada show their anger and elect an outright majority so Canada can get on governing itself.

Again, the current Canadian leadership has done a splendid job of steering the Canadian economy through a most difficult period of global economic upheaval. But voters can be a fickle bunch as the defeat of Winston Churchill by the British voter after World War II always reminds us. The Canadian dollar has been the “darling” of the global investors so the LOONIE will probably be under pressure as some long-held positions are liquidated. Uncertainty will now hang over the Canadian polity and it seems that the Bank of Canada will not be raising rates as it will wait for the election to be resolved.

It appears Chancellor Merkel has been delivered a defeat in Baden-Wurttemberg as Germany’s wealthiest state fell from CDU leadership for the first time in 58 years. The CDU‘s defeat was blamed on the nuclear problems facing Japan as it was the GREENS who gained the most amount of votes. It is too difficult to determine if the Greens were also the recipient of just an overall anti-CDU vote because of the EUROPEAN DEBT CRISIS and Merkel’s flip-flopping on nuclear energy. I say this because the FDP, Merkel’s junior coalition partner collected 5.1 percent of the vote, which will allow the FDP to maintain some seats on the state government. Had nuclear been the overwhelming issue, the FDP would have been totally trounced as its position on nuclear energy has been the need for more nuclear generated power. Merkel also failed to come away from the SUMMIT in Brussels with anything definitive, creating the image of a very weak German leader at a time of great instability in the EU economy.

Also, the Irish have let it be known that they are pushing ahead with an effort to force private investors take some losses on the debt of IRISH BANKS. If the hit to private bondholders is big enough, it could have a significant impact on the capitalization of German and French banks, which own a considerable amount of Irish bank debt. The contagion that could follow might throw the EU into a new and deeper financial crisis as Greece and Portugal would certainly join in the Haircut Parade. Irish PRIME MINISTER ENDA KENNY is certainly feeling stronger as he knows that Ireland has the large European banks in a difficult situation–thus the ECB. Making the political equation more difficult is that the highly regarded FINNS are going to the polls in April and the most contentious issue is the amount of money to be contributed to the EU bailout plan. The TRUE FINNS are an anti-EU party and they are making large gains in the polls. There is nothing easy when trying to craft policy for a conglomerate of 27 separate nation-states.

Two quick hitters. First, in Australia PRIME MINISTER JULIA GILLARD’S Labour Party suffered a huge defeat in the state of NEW SOUTH WALES. It has been a stronghold for Labour but Gillard came under attack for her wish to tax natural resources and also add a carbon tax. The voters in Australia said loud and clear: Do not destroy the golden goose of natural resources that is providing so much growth for the entire Aussie economy. This should be deemed a positive for it will mean that global capital will again seek to invest in the raw commodities with which Australia is so well endowed. To the Canadians, I say pay attention to your fellow DOMINIONEERS.

Second, sticking to the British Commonwealth, the streets of high-end London were the scene of nasty riots. There was a huge anti-austerity budget demonstration that was peaceful until the ANARCHISTS broke off from the main body and went on an anti-capitalist, anti-wealth rampage. It was an ugly scene as high-end stores and banks suffered the at the hands of the nihilists. The police were out in force and we will wait to see what political backlash develops. The Cameron Government is presently on shaky ground with its involvement in Libya so it will have to wait to see how the TORY/LIBERAL coalition holds under this political backlash. Oh the travails of trading based on the fragile elements of POLITICAL ECONOMY. No wonder 2+2=5.

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