Low Expectations, and the Failure to Meet Them...US Update

Today says a lot about how low all of our expectations really are of the EU leaders really putting together a solution over the weekend.
They announce yesterday that they need a second summit next week to stand a chance of coming out with a plan, thereby breaking the “unbreakable deadline”, Italian bonds reach the magic 6% yield in 10 years, beyond which they apparently get earthquakes, tidal waves and a distinct problem repaying their debts, officials still keep banging on about a a totally arbitrary and destructive 9% figure for bank capital requirements and yet…..

CDS financial indices are tighter, as are the main indices and short term bonds are actually tightening amidst a bit of real, honest buying interest…. Just a bit.

As for the bank capital idea, who decided that 9% was the right figure anyway? Some banks are doing very nicely with 6-7% capital ratios and good business models (for whoch read, they never bought many sovereign bonds, at least not from southern Europe) and therefore need no more capital imposed upon them. Some will go bust just as surely with 9% capital ratios as 6%, if sovereign defaults come along. Will someone please tell the politicians to butt out of this desire to treat the symptoms and get on with solving the real problem- their own runaway debt mountains? Does anybody really believe that the banks won’t reduce their loan books heavily to boost capital ratios? Meaning, if you believe the media, that the World will be plunged into a second dark age, or possibly even the next ice age, almost immediately?

I guess any signs of progress this weekend will be greeted with relief and exuberance on Monday, so far have our hopes fallen… have a good weekend and get ready to charge out of the trenches when the shooting stops.