Today’s July Payroll result cooperated quite nicely with our constructive view on the US real sector (+154M, private payrolls /av hourly earnings +0.4%).
The world mkt’s worry is 30% the US (and soon to go lower) and 70%, EU contagion.
Italy and Spain are headed to the dumpster unless the ECB, as there is no one else willing - buys their bonds. As Willem Buiter notes today, "the fundamental design flaw" to the EU is the lack of lender of last resort, referring to the doubts of many if the bank has treaty authority to buy a ton of Italian and Spanish debt. The ECB had better assume that role pretty quick. ECB Pres Trichet said Italy has to show it is "ahead of the curve," in taming its debt before we do that.
You big baby.
Robert Craven
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