The Calm Before The Storm

Why is it so quiet? Europe’s leaders are on vacation. Nothing is so important as the sacred European August  vacation.

  • Spanish Prime Minister Mariano Rajoy is spending his vacation in Sanxenxo, Galicia – his birthplace.
  • German Chancellor Angela Merkel is attending the Wagner opera festival in Bayreuth, then she will be hiking with her husband in the Italian mountain village of Sulden.
  • French President Francois Hollande taking with a break on France’s warm Mediterranean coast, near his presidential residence of Bregancon Fort.
  • Italian Prime Minister Mario Monti relaxing at his wife’s house in Solcio di Lesa.
  • Portuguese Prime Minister Pedro Passos Coelho headed for a two week break in the southern Algarve region.

Only in Greece is the situation so bad that Prime Minister Antonis Samaras has decided that the members of his cabinet will stay at their posts.

But don’t imagine for a minute that the silence means that nothing is happening. The economic mess is continuing to unfold, as shown by last night’s Chinese export data, which show trade is collapsing, just as David Rosenberg predicts. The relative peace and quiet has allowed the complacent stock market to be pushed up by the relentless HFT black boxes, and Treasuries have sold off as fear has ebbed. The big question is, to what extent will the market front-run the return of reality?

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