It seems that we have covered the major themes ad nauseam–European debt, U.S. fiscal cliff, Japanese lethargy in confronting an overvalued currency, Chinese slowdown–and the list goes on and on. Today, the IMF let loose a report that detailed the need for Europe to deleverage its banks to the tune of a possible 4.5 TRILLION EUROS. This is not the aid and comfort that a financially stressed European economy needed. The pains of austerity will be minimal compared to the massive selloff of what ever assets will be dumped on the market. Government retrenchment coupled with private sector rebalancing will undoubtedly lead to a new thrust downward in the adverse feedback loop. The significance of the yield curves will be a critical indicator as the quarter begins to reveal all of the potential hazards with which the global financial system has to contend.