The political shouting in Europe reminds me of the shouting heard here in America back in 2008, 2009, and 2010 when the argument raged about the role of the Federal Reserve and the role of government in protecting the economy as lenders of last resort. When the loud voices on both sides abated, the government jumped in with TARP ($700 billion) and the Fed jumped in with low interest rates (just about zero), quantitative easing ($1.7 trillion), and an inflated balance sheet that created massive liquidity (printed money). In the end, this is what it took to keep the financial system from collapsing and to reverse contraction in the economy, and even though the political fight was ferocious, when the bricks underneath began crumbling, somehow the arguers found the political will to get the job done. This is exactly the same position in which Europe now finds itself.

ECB policymakers continue to reject international calls to intervene decisively as Europe’s lender of last resort, stressing it is up to governments to resolve the debt crisis through austerity measures and reforms.

The words above remind me of the words heard back when the U.S. had the same argument – it is up to the banks, businesses, and individuals to resolve their respective debt problems. Ideally, yes, but we don’t live in an ideal world. As Plato defined for us almost 2,500 years ago, there are two worlds. In one, everything is ideal, perfect in form, and sublimely beautiful. In the other, everything is shades of the ideal, imperfect in form, and beautiful or not depending on the human eye. The point is that Europe can harp about the ideal, i.e., it is up to the individual countries to fix their fiscal problems, or Europe can accept the reality of the world in which we live – the folks who can print money are the lenders of last resort. Right or not, if you want to save the system, printing money might just be the only way to do it. I believe the European bricks are now beginning to crumble. Let’s hope the ECB, Germany, and France learned from what the U.S. did back in those tumultuous years “full of sound and fury signifying nothing.” In the end, either you brace the bricks and rebuild or you let the house fall.

As Europe edges closer to the precipice, I am also reminded of the recent political battle about our debt ceiling, ya know the one in August that sent the market skidding. Once again, politics pushed the market, businesses, and the consumer to the brink of believing all was lost, yet, somehow … Oh yeh, the “somehow” is what the U.S. now faces – the “super-committee” has just one week left to offer a solution to our own debt problems. Once again, here we are looking down into the abyss. I guess this is what it takes to get the policy makers off the dime.

More good economic news here in the U.S., and as you know, if it is there, I will write about it.

US factories made more cars, electronics, and equipment in October; overall output rose sharply. The gains provide an encouraging start for the October-December quarter. They come just as separate reports show that wholesale prices are flattening and U.S. shoppers are spending more at Wal-Mart (1st quarterly gain in two years).

Trade in the day – Invest in your life …

Trader Ed