November 5th 2011 – Gunpowder, treason and…what?

Despite the Greeks managing to avoid “blowing up” their parliament for the time being, although G-Pap must be on his last legs, one wonders who will be next in the firing line. There is no shortage of candidates.

Despite the 25bps rate cut by the ECB on Thursday, Italian 10 year bond yields closed on Friday at a high for the year, having briefly blipped down on the announcement. The half-life of central bank intervention is now calculated in hours and minutes rather than weeks and months. In this case it didn’t take long for the markets to realise that “Super Mario’s” rate cut meant that American style easing was not on the agenda at the ECB confirmed by their threat to suspend purchases of BTPs (Italian government bonds); but for how long I wonder?

The head of the International Monetary Fund, Christine Lagarde, has said that Italy’s planned budgetary reforms “lack credibility” – a euphemism of the highest order – quite obviously lost on Berlusconi who has said he is very happy for the IMF to come and look at the books. Which set Silvio?

What are the options? Well the G20 didn’t come up with any apart from agreeing to bolster the reserves of the IMF…by next February; and Harold Wilson thought a week was a long time in politics! Sarkozy said, “We will fight to defend Europe and the euro,” making the typical euro-elitist assumption that everyone believes the two to be mutually inclusive; they are not! The Great ERM (exchange rate mechanism) experiment failed in the 1990s and the euro is on course for a full rinse and repeat.

One of the few actors appearing in both comedy farces is Jean-Claude Trichet in his dual roles as Governor of the Banque de France and President of the ECB. Throughout his career he has been obsessed with la stabilité du système at the expense of policies to encourage growth. Low inflation was the name of his game and in that he has prevailed, but at the cost of destabilising the whole, wretched système itself; although he would never admit to it…Gallic shrugs are now strictly limited to discussion about the rugby World cup final…If what we are seeing now is stability then his definition of a “fire” storm would make interesting reading.

Had Guy Fawkes succeeded he would have achieved what we are hankering for right now; a lot less government. Without the continual interference in our daily lives we might have avoided most of the pain that our politicians and central bankers are hell-bent on delivering. Most of them have little understanding of real world economics and pretend to know what is good for us and pass laws to make it so.

Whose effigy will be on the Greek bonfire? So many to choose from…