Europe is falling apart---close to bringing the whole world down.

DJIA
12,118.57 DOWN 274.88 DOWN 2.22%

S&P 500 Index
1,278.04 DOWN -32.29 DOWN 2.46%

Deutsche Borse AG German Stock Index DAX
6,050.29 DOWN -214.09 DOWN 3.42%

FTSE 100 Index
5,260.19 DOWN -60.67 DOWN 1.14%

What have we learned? A global system that allows us all to thrive together in good times, also means we suffer together in lean times.

http://www.reuters.com/article/2012/06/01/us-global-economy-idUSBRE85008R20120601

China slowdown worsens amid signs U.S. losing steam

Only a few years after the depths of 2008, the American financial sector, saved by brute force, half-measures at reform, and compromises spearheaded by Paulson, will have to face a new crisis that threatens to once again shake the foundations of global finance.

Goldman Sachs (GS)
92.64 Down 3.06(3.20%)
3M Down 20.99%

JPMorgan Chase & Co. (JPM)
31.93 Down 1.22(3.68%)
3M Down 17.88%

Morgan Stanley (MS)
12.73 Down 0.63(4.72%)
3M Down 30.38%

Will stronger capital buffers, and the ability to borrow at the discount window from the Fed make the difference? Or as JPMorgan's recent venture into CDS shows, will we have learned that an even bigger "too big to fail" Wall Street hasn't changed one bit? We have no choice but to wait to find out.

And this is the frustrating part. I don't revel in failure. But this was something that people could see coming a mile away, and even now that we are beginning to fall down the rabbit hole, there is a surprising degree of inaction both from the center of the crisis, and from the countries that stand to be engulfed in the implications. The Europeans shoved everything back to another one of their Euro summits. The financial world is one bad and chaotic Greece result from fraying. Yet we still have more or less the same cast and with the delayed implementation of Dodd-Frank and pushback on Basel III, close to the same rules as during 2008.

If things don't go any better (and I am not precluding this possibility entirely, though my hope for this diminishes every time Europe's politicians talk), capitalism as we know it will probably have to change. Whether it will be gradual reformist movements such as new strands of Keynesian thinking and social democracy, or something more radical...well, I'm not sure. But I cannot fathom things staying the same if we go through the same mess twice.

 

http://www.reuters.com/article/2012/06/01/greece-tsipras-idUSL5E8H1HLK20120601

Of course, the Euro summit is a week later.

Nero fiddling while Rome burns? The Euro leaders need to sit down together NOW and hammer out solutions to get out of this hole, before Greek voters take things in their own hand, and elect someone the market will try to kill. What the f**k.

ECB head: Euro structure 'unsustainable,' new vision and bank controls needed

 

http://ca.finance.yahoo.com/news/an...jBF9TAzExODQ1NTAwMDgEcG9zAzIEc2VjA211c3RyZWFk

MS the first to be in significant trouble. As if the Facebook IPO wasn't enough.

 

I hold a glimmer of hope for Wednesday's ECB meeting. From the tone and candor, I think Draghi will be much more dovish, and slash the policy rate by 25 basis points. He might also pump in more money in the system, in different ways. The problem is Europe still needs to quickly drag itself out with actual structural reforms, and the ECB is legally constrained from things like funding illiquid private banks, but the ECB can buy some time, which is key at this point.

Coordinated with a Fed QE3, it might lift the world out of the bear market for a little while. Still, these aren't permanent solutions, and each will eventually have their consequences.

 

Will this be the move that insulated America from Europe? It's the only hope at this point, with only the pretense of Dodd-Frank and Basel III having forced other arbitrary and anticipatory reforms.

http://dealbook.nytimes.com/2008/09/21/goldman-morgan-to-become-bank-holding-companies/

 

To be perfectly honest, if you're talking with ATW in this thread, he's wasting your time and his.

It was fun baiting him, but now that the issue has gone over his head, it's preferable (for me at the very least) to see "This user is on your Ignore List.", instead of whatever trivial thing he is posting.

Anyways, the slowdown of the BRIC countries is another worrying trend. While relatively speaking, the difference between 8% growth and 6% growth might not be such a big deal for the developed world that has long given up on achieving those growth figures, this slowdown has many implications.

For example, the split in China between market-oriented reformists and more traditional hardliners will probably fracture even further given the evident flaws in the system China is trying to adapt. Given that China is in the middle of a once-in-a-decade transition of power, this does not auger well.

 

Decoupling is definitely a myth. There might have been a slight loss in co-movement among American and European indices for a very short time, but I think the markets have re-realized that a sick Europe means a sick America, especially as it is beginning to significantly affect real economic variables.

Still, one would hope that the compromises made after 2008 made Wall Street slightly stronger (chiefly the investment' banks decision to take on some regulation and have the unquestioned ability for cheap liquidity from the Fed at any time as bank holding companies), and able to hold their own against financial crises elsewhere---in that way, the American economy might be buffered, at least in terms of the financial system.

I have my doubts as well. But, really, if an even bigger-than-2008 Wall Street falls on its' knees...I mean sometimes, you just got to hold onto glimmers of hope, faint as they might be.