Unfortunately, the headline story today on front pages everywhere was the murder of the U.S. ambassador and three of his team in Libya. The Financial Times (FT) led with “Marines sent to Libya after envoy is killed in mob attack on US consulate,” the New York Times (NYT) had “Attack on US Site In Libya Kills Envoy; A Flash Point for Obama and Romney,” and the Wall Street Journal (WSJ) had “Libya Attack Sparks Crisis.” My thoughts and prayers to the families of the victims—there is not a lot else to say.
Economics got pushed to the back pages. The decision by the German court to approve Germany’s participation in the European rescue fund was on page 3 of the FT, with “Constitutional court refuse to block creation of rescue fund.” Meanwhile “In Victory for Merkel, German Court Ruling Favors European Bailout Fund” appeared on page 6 of the NYT, and “German Court Clears Rescue Fund” appeared on page 10 of the WSJ. This is a major victory for the euro, as not only was the rescue fund approved, but the language used made it more difficult for future challenges to be filed, and the conditions imposed were less than had been feared.
The other potential risk, the Dutch elections, also went in favor of the euro. The NYT had “Support for the Euro Is Seen in Dutch Election Results” (p. A15), and the WSJ had “Dutch Vote Shows Pro-Europe Trend” (p. A11). Two major uncertainties have been removed from the euro’s path, and I have to say I am encouraged. The war is not over, but two major battles have been won.
The reason the war is not over is that the problems remain. Budgets have not been balanced and necessary cuts and changes have not been made. The steps taken provide the tools to make solving those problems less painful than it would otherwise be, but the problems still need to be solved.
The European Union is well aware of this, of course, and is already trying to use the momentum to take the next steps. “Barroso calls for EU federation” in the FT (p. 3) and “EU Chief Calls ‘Federation’ the Way Forward for Bloc” in the WSJ (p. A10) show that the next battle has already been launched. Let’s see how the rest of the war goes.
The news in the U.S. was not as good. The FT had “US median income lowest since 1995” (p. 6), the NYT had “US Income Gap Rose, Sign of Uneven Recovery” (p. A19), and the WSJ had a trifecta—“Household Incomes Sink to ’95 Level” (p. 1), “Executives Press Washington to ‘Fix the Debt’” (p. A6), and “Economists Are Uncertain More Fed Moves Will Work” (p. A7). The slowing U.S. economy continues to frustrate attempts to juice it.
Two more stories worth noting. The first, which made all the papers, was the release of the iPhone 5. Rah. Looks like a neat gadget, and I really like my iPhone 4S, but at the end of the day it’s a phone. Evolution, not revolution. The other is the Fed’s implementation of QE3. The markets loved it, and we will be discussing it more tomorrow. Briefly, the Fed has essentially signed on to continue stimulus as long as necessary—a big change, and one that may be intended to be consistent with European Central Bank policy. More on this tomorrow, but this is further confirmation that Washington, DC, is now the financial capital, not New York.
Have a great day!