The Euro: Preservation efforts get serious.

It is important to understand the problems of Europe and the US and note the difference. In the long term, both face the debilitating effects of Socialism; Europe more so than the US. Europe faces a liquidity problem (the fiscal crisis) from too much debt, the US faces a problem of a Socialist elite that wants to crash the economy so we have a revolution.

I have been commenting mostly on the European debt crisis. The crisis continued because Europe's leadership was unwilling to do what it needed to do in order to solve the liquidity crisis before tackling the long-term problems.

This is changing. Comments by Ewald Nowotny (Governor of Austria's Central Bank and Member of the ECB Council) has come around and threw his weight to the idea of letting the ESM become a bank that can 'print' money to rescue the banks of Spain. That alone buoyed stock markets in Europe and in the US and dropped the US Dollar below 83(just as Larry's forecast of the Dollar going to 86 came out). In addition, Mario Draghi, President of the ECB, declared that the ECB will do whatever is needed to preserve the Monetary union (meaning the Euro) within the EU mandate.Dire predictions of European hyperinflation are not in order as the Euro was clearly deflating.

The FED is meeting again and may ease though it is not likely that they will call it QE3. As I pointed out, the FED need not print, simply allowing the banks to reduce reserve requirements and use that to make loans 2-10X more than the reduction in reserve, is sufficient to act as a stimulus. Spanish and Italian bond rates dropped on the news.