Though euro crisis is not yet over, the banks are being made to recapitalise in readiness for Greek debt restructuring.

Little from Jackson Hole, but opinion is changing in favour of recognition that the West faces years of slow growth and that central banks can do no more to help

The objective of the Chinese Government is first to implement Renminbi internationalization, then convertibility. To be considered as a international currency, China should development its financial markets. In this context, bond markets is gradually opening to international investors.

Will the politicians save the euro before Greece defaults? What are the Chinese doing? Already the RMB is bond issuing and Asian trading currency. Reserve currency next?

Flattening the yield curve, clearly the objective of the Fed at least, sounds like a good idea to improve borrowing. Unfortunately it ignores the problems created for banks.

Bridport Investor Services thought the Federal Reserve's Ben Bernanke would announce a third round of quantative easing, however the lack of announcements at Jackson Hole has been hailed as a disappointment

“True economic governance”? What a fudge! We ask whether the weak announcement from Sarkozy and Merkel is a measure of poor leadership of political realism.

The best hope now is that the ECB stop gap measures work, that federalisation of the euro zone advances and that the recession is “L-shaped”, not a double-dip “W”.

Now that the Congressional brinkmanship is over, markets clearly see the inadequacies of the US budget plan as well as the chronic structural problems of the euro zone.

Bond Outlook

Palliative measures to economic malaise are being proposed on both sides of the Atlantic, with little attention to underlying problems of budget deficits and a needed monetary union.

In view of the public disapproval of banks, it might be thought that banks would be wiser to acquiesce to proposals to separate retail from investment banking

Trichet agrees with us that federalisation is the answer, too! The movement is underway but with opposition in both the rich North and the poor South of the EU.

A temporary solution to the euro zone’s problems is on the cards, along with federalisation as a longer-term outlook. Meanwhile the situation in the USA is not improving.

Whether the EUR or USD is “stinkier” is debateable, but it is clear that political considerations are taking precedence over economic both for possible QE3 and defence of the euro.

Prevarication is the order of the day: postpone the day of reckoning for the Federal debt ceiling to August 2nd and delay proper resolution of Greek’s problems by extending maturities.

Consider the parallel between the USA and China today and the USA and UK of yesteryear. Massive indebtedness of one country another implies ceding much power to the creditor nation.

The USA is in an economic and political impasse. Economically Bin Laden's demise my not matter much, but politically it is crucial, giving newfound authority of President Obama

The EUR has problems, the USD falling, gold and silver soaring -- can this be a full-blown monetary crisis, or a controlled change in the world monetary system?

S&P has now followed the Chinese Dagong in questioning the AA rating of Treasury debt, another step in the loss of the “exorbitant privilege” of owning the reserve/trading currency.

Many months ago, when we first suspected that the USA could not face up to austerity, we reckoned it would be forced upon the nation by the market.

The US economy is recovering, but only because of cheap money. In contrast, Europe appears to on a path to normalisation of bond markets and central bank policy.

Two major riddles: when will inflation hit the US economy and will quantitative easing be extended beyond June? We suspect QE extension but the inflation issue is a full mystery.

Japanese rebuilding, the Arab Awakening and China’s “Lewis turning point” all point to good news for Western economies wanting to increase exports, but bad for T-Bonds and interest rates.

Every central bank has tightened or expects to, except the Fed. Inflation lets debt decline. Is someone whispering as much in Bernanke’s ear? Does that mean a QE3 come June?

Which way now? So many dilemmas. For Bernanke, to print money or tighten. Has the USD lost its shine? Safety or yield for investors?

Three great dangers to the world economy have become more apparent in the wake of the Libyan uprising. The G20 meetings achieves little on the issue of monetary reserves.

A falling dollar, rising commodity prices, and inflation in Asia threaten the standard of living in the West and especially in the USA, and undermine the reserve currency system.