What to Worry about Today: Big country lies

Outlook:

We get existing home sales today, one of the most important of the interest-rate sensitive sectors. Expectation are not running high for a favorable outcome so we should probably expect some angst today.

It’s a messy end of the week. Over the weekend, we might get some new stories about the murder in Istanbul, the date of the next recession (big banks say 2020), the US midterms, and a few other hot points—but the main event is likely whatever Italian leaders say about being insulted and treated like a child by the EC. Demanding an explanation in a few days is stunningly supercilious. It’s exactly like a parent demanding of a teenage where he spent the evening and why he is missed his curfew getting home. You don’t have to be a hot-blooded Italian to get your feathers ruffled by such treatment. 

Gee, it’s almost as though the EC is trying to pick a fight. An intemperate response would show the EC’s point—Italy can’t be trusted to do the responsible things. The EC seemingly plans to ground its teenager for a month and no car for a week. This is no way for allies to treat one another. It seems Brussels learned nothing from Greece. Remember that a lot of what the Greek leaders were saying at the time was perfectly accurate in term of economic analysis—without a bailout, the fiscal austerity was going to lunge Greece into poverty and misery for many years. And so it did. But Italy has already suffered quite a lot from hitting EC targets and wants to try something different. The EC is making a big mistake by refusing to work with Italy and instead working against what its leaders see as Italy’s best interests. Clash of sovereigns, indeed.

The euro is toast. That doesn’t mean the dollar is king, but turmoil elsewhere tends to favor the US.

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