Momentous Decisions

A decision of global import,
Of the market-determining sort,
May sometimes be posed
For the judgment of those
Who make up a council or court.

Though everyone knows how it has to be,
Since there's only one way to vote ration'ly,
The markets are all
Completely enthralled
By the spellbinding risk of catastrophe.

Today, the financial world is enthralled by two such momentous decisions: 

• In Germany, the Federal Constitutional Court in Karlsruhe must determine whether the European Stability Mechanism may proceed; i.e., whether Germany may participate in it. Everyone expects a resounding "Ja" from the court, as a euro-collapse may well be the consequence of a "Nein" decision. At the same time, the court's upholding the ESM does not mean business as usual, as it would set in motion a process that may well end in a loss of German sovereignty to some form of European political union. 
• Meanwhile, here at home, the Fed Open Market Committee is expected to end its September meeting with an announcement of QE3, the third round of quantitative easing. Intended as a new round of economic stimulus, QE3 is already having an effect on the market before it's enacted, but it is not clear that a new round of Fed bond-buying will move the dial on the unemployment rate. 

Regardless, it appears that New York, London and Tokyo have already decided what Washington and Karlsruhe will do. Shares are up and the dollar is down in anticipation.

IMF MD to EU

"If the euro would founder and fester
From the wounds that beset and distressed 'er,
Ideology marred
The chance," said Lagarde,
"Of avoiding zees awful deezester."

IMF Managing Director Christine Lagarde, speaking in Berlin, sounded the euro-alarm as never before: "It is about avoiding a 1930s moment, in which inaction, insularity, and rigid ideology combine to cause a collapse in global demand," she said before the German Council on Foreign Relations; "A moment, ultimately, leading to a downward spiral that could engulf the entire world." The IMF managing director would like Germany, France, the ECB and other key players to strengthen their support of the eurozone's liquidity and financial stability, to avoid an Italian meltdown in particular. As Mme Lagarde expresses so dramatically, such a development would not be confined to Europe.