Not a Good Week on Any Front

It’s the end of another week, and what a week it was. Let’s just review where we are at this first weekend of June.
1. Russian President Putin visited both German Chancellor Merkel and French President Hollande on Friday and delivered the same message in Berlin and Paris -- Russia will not agree to cooperate in the ouster of Syrian president al-Assad, at least not for now, so the hopes of getting some easing of the Russian stance on Syria are once more dashed, while the killing goes on in the country and photos of makeshift garage hospitals trying to save the lives of civilians hit by al-Assad bombs are still showing the world just how ruthless al-Assad is and how serious a violation of Russia’s international obligations Putin’s present stance represents.
2. Polls this week show President Obama and Mitt Romney neck-and-neck within the margin of error going into the summer campaign season. But, more significant is the poll result that shows that 2/3 of Americans believe the economy is the most important issue in the election and 2/3 of them also believe that Romney will do a better job than Obama has done in managing the economy. This goes a long way to explaining why the Boehner-led GOP majority in the House of Representatives has put aside social issues to take up the economy and employment as their central topics of concern.
3. Meanwhile, the world’s financial stability was rocked again today by several events.
First, the ECB president said that the Euro cannot be saved unless the European Union leadership takes much more decisive action with a strategy that so far they have not articulated.
Then, Spain and the International Monetary Fund got into a quiet shouting match about whether Spain has asked the IMF to help it with a bailout package -- the IMF says Spain has asked and Spain says it has not. But the bond markets were taking no chances and the Spanish 5-year interest rate soared well above 6%. Alan Greenspan, on CNBC this morning, said that he is watching the Spanish and Italian 10-year interest rates and the difference (the spread) between the German and French 10-year interest rates to stay ahead of what’s going on with the Euro, which he believes is in danger of failing. Interesting is the fact that German unemployment is at a 2-year low while the rest of the EU is at an all-time high of 11%. Not the stuff for building lasting political coalitions.
And, the Euro itself was cratering again today against the Dollar and most other currencies, finishing just above 1.24 Dollars to the Euro, down 6% in May alone. But, what should be good news for the Dollar may not last because…
4. Back in America, the latest jobs report showed that only 69,000 new jobs were created this week, while the financial world was expecting 150,000. At the same time, the US unemployment rate rose from 8.1% to 8.2%, while those same financial folks were expecting it to drop below 8%. This is not good news for several reasons. First, too many Americans are out of work, and experts say if those who have simply stopped looking for work were included the real unemployment rate would be near 15%. Second, with Europe in the tank and China losing its growth head of steam, if the world is to dig itself out of its worldwide financial and fiscal mess, America will have to lead the way, something it is just not doing yet. Third, the bad news sent the stock markets spinning downward to the lowest level of 2012, which is really bad news for investors, retired people, and also for the Dollar because Greenspan and a lot of other experts are now saying that the June Federal Reserve meeting will most likely produce another round of quantitative easing or something like it, with the Fed buying up government bonds and pumping up bank capital to help the stock market rise, as it has done every time QE is put in place. The problem is that QE will knock the wind out of the Dollar’s sails, and it will probably fall again against other world currencies, maybe even against the Euro.

All in all, this week is one we could have done without.