Bull-runnings...!

The markets are poised for another volatile week this week ahead of the EU and IMF reports on Greek-solvency and Thursday’s German vote on an EU stability fund. It’s a disheartening prospect for most. Even so, sifting through the financial jargon, speculative volatility and political impasse is possible if you ignore the emotive pull of FEAR. (Net equity outflows suggest that’s more easily said than done).

Faced with this political turned banking turned economic-growth turning political turned banking turned…. crisis it’s easy to understand why investors have lost confidence in the system. Without understating the brevity of the EU/global crisis most of the recent stock-market declines have been self-inflicted by investors susceptible to an emotive press. It’s usually costly as history will show.

As a reminder and working backwards: - Biggest weekly stock-market declines since Lehman and the financial crisis in 2008;  commodity prices collapse on adjusted forecast growth prospects; Bernanke predicts ‘significant’ risk to the downside; ECB commits to three-month funding for EU banks locked out of the interbank funding market; EU banks stock-prices collapse on exposure to Greece and other potential EU-member delinquents; Greece faces default; euro strength threatens EU-member nations unable to export; German growth exceeds expectations on exports to a captive duty-free eurozone market; EU banks encouraged/compelled to lend to member nations favourably; France and Germany push for a common economic union.

So what did we expect? Surely we should not be too surprised by the latest turn of events in Europe? The structural inequity in the 'common-union' was manifest at inception. One more thing whilst we're on the subject of economic imbalance; only an eternal optimist or a fool would suggest that China's phenomenal growth does not carry with it some interesting socio-economic issues still to manifest. Legislated economic subjugation ALWAYS has a shelf-life...

Nevertheless, emotively speaking, you might conclude that the latest stock-market crisis is a FEAR-contrived response to failing confidence in the system. Until we see evidence otherwise, liquidity-confusion will stay systemic.