Are you tired of seeing European politicians meddle with the value of your share portfolio on a daily basis? Their bickering is unleashing waves of optimism and pessimism around the world.

Hedge fund manager

But maybe an autocracy is just what the Italians need... after Berlusconi...

That's how an optimist could interpret it anyway.

A cynic would point out that both the new Greek and Italian leaders are Goldman Sachs insiders. As is the new European Central Bank president, Mario Draghi.

Monti was an international adviser to Goldman Sachs from 2005 until his nomination to lead the Italian government. According to the bank, his mission was to provide advice "on European business and major public policy initiatives worldwide". As such, he was a "door opener" with a brief to defend Goldman's interest in the corridors of power in Europe.

The third man, Lucas Papademos, was the governor of the Greek central bank from 1994 to 2002. In this capacity, he played a role that has yet to be elucidated in the operation to mask debt on his country's books, perpetrated with assistance from Goldman Sachs. And perhaps more importantly, the current chairman of Greece's Public Debt Management Agency, Petros Christodoulos, also worked as a trader for the bank in London.

But why does Goldman Sachs' influence matter? Remember, in 2008, Treasury Secretary Hank Paulson, also from Goldman Sachs, just about staged a coup to bail out US banks. He had to threaten politicians with the notion that their salaries wouldn't be paid if the financial system ceased to exist. That got them moving. Transcripts of the many phone calls Paulson made to Goldman Sachs' CEO at the time would make for interesting reading. All we know is that there were a lot of calls between the two during the crisis.

So the Goldman boys have rigged the deck in their favour in Europe too. Bankers have positioned themselves to pull off another bank rescue. But it doesn't always work out well for them. Goldman Sachs CEO alumnus, Jon Corzine managed to run the enormous brokerage firm MF Global into the ground on European sovereign debt recently. The bankruptcy has hit several of his Goldman buddies too. Not to mention many Aussie investors.

Economics Will Catch Up With Politics

What's remarkable about the political shenanigans in Europe is that the stock markets buy it. Literally and figuratively. That's why the stock markets have resembled a seesaw lately. Up on good political news. Down on the bad. Ending nowhere.


By the by, we've left the Americans and their mess out of our list of things to worry about because it's difficult to make heads or tails of them. Here is an example of the nincompoopery coming out of the US central bank... affectionately known as 'The Fed'.

Bloomberg, November 14th: 'The odds of a U.S. recession in early 2012 exceed 50 percent as a result of Europe's debt crisis, according to researchers at the Federal Reserve Bank...'

Yes, on the same day, two research groups from the same institution managed to completely contradict each other. It's not clear what they are smoking at the Fed these days, but it's definitely working.

Whether the world reacts badly to the realisation that welfare states don't work is still up for grabs. On the one hand, times will be tough. But when times are tough, the tough get going. We could see a resurgence in economic growth once debt troubles force deadbeat governments to downsize. And that forces people to work hard.

What has become very clear this week is that problems are accelerating. Finance guru's blogs are running hot. Derivates are fluctuating all over the place. Swiss credit default swaps rallied (worsened)

Until next week,

Nickolai Hubble.
The Daily Reckoning