Both sides have some differing advantages in the long and short terms: the American (and to some extent Chinese) approach is better for the short-term resolution of the financial and economic crisis. It is clear now that world economic recovery will have to be led by the US locomotive, just as it has for over 65 years. The European approach leads to slower economic growth but is probably better for the long-term health of the financial sector.

Europeans are reluctant to increase the stimulus approach because they are under less political pressure to do so, and that is because Europeans do not lose their health care when they lose their jobs: they have extensive public health care and safety net systems where everyone one is covered. Health care is simply not something a European loses sleep over, something that can happen in the United States. True, they are subject to public health bureaucrats, as the conservative media in the US claims, but then the American worker is subject to the health insurance company bureaucrats who decide what is covered.

This health care issue also makes European and Japanese companies more competitive: think of the huge cost to GM of worker and retiree health care payments. That, and lousy planning, is what has made GM less competitive with the likes of Toyota and Honda. It is this factor and not the phony lower taxes argument that gives these non-American manufacturers an advantage: real American corporate taxes are probably lower because of all the loopholes.

Some large European governments are also reluctant to increase their stimulus spending because that would benefit other Europeans, i.e. people who do not vote for them. This is especially true of France and Germany. This is so because Europe is economically united, but politically very divided, especially now that many former socialist Eastern countries have joined the EU

The European advantage is in the field of regulation and supervision. Had the European regulators had their way a few years ago, the rogue financial engineers of AIG, especially in its London offices, would not have been able to wreak havoc to the extent they did. (Except they were not really rogue employees: they had the full backing of the management). The banks would not have been able to gamble their shareholder equity in such toxic instruments as the CDS (Credit Default Swaps).The Euros were blind-sided by relying on American regulators who simply did not do their job, who did not have the manpower or brainpower (can we say horsepower?) to do their job adequately, so emasculated they had been by the U.S Congress under Republican control.

In other words, the financial industry, with the collusion of some in the US Congress, created a regulatory and supervisory gap not covered by either continent- a gap through which the rogue elements sneaked (or snuck) like rats would enter a home. Now the Europeans, having been stung this time around, want stricter regulation: and rightly so. The US is tending toward the same for now, but it is not clear to what extent. It is hard to tell what the Senate will do to a tightening regulatory bill before it gets through. Too much money has flown under the congressional election bridge in recent years. Influential Democratic senators come from “banking” states, so does Joe Biden of the great banking state of Delaware. Some of them tend to espouse the CNBC approach which increasingly looks like a hold-over from the old era of deregulation at any price.

CNBC is doubling down on Jim Cramer, the embattled host of one of its shows. This after Jon Stewart's expose of CNBC and Cramer over several episodes of his Daily Report show. The whole NBC network with all its vast satellite channels have reacted by going to the mattress against the Comedy Central show. They have hosted Cramer several times, including on Meet The Press, which I thought was dumbing down the show. They have not invited Stewart to get his opinion, yet.

Obama is meeting with bank CEOs today. Big mistake: what does he have a Treasury Secretary for then?

A princely opinion: His most royal highness, Prince Nayef Bin Abdul-Aziz al-Saud, Saudi Minister of Interior (i.e. internal security, police, religious police, immigration, and whatever else he fancies) has been awarded an honorary doctorate in political science from the Lebanese University in Beirut. The award was presented by none other than Saudi Arabia's second man in Lebanon, prime minister Saniora.

On this occasion, his highness has opined on his political philosophy, such as it is, expounding that his country does not need to hold elections. He said that elections are an unnecessary luxury. His royal polygamous and tribal highness also opined that women should not be represented in any political body- not that any men are represented either. The Arabian Cicero further opined eloquently that “appointment is always better than election....with elections we would never get people as qualified as we have now in high places…”. He was probably referring to himself… and maybe former ambassador-by-appointment John Bolton as well.

This reflects an ongoing power struggle within the ruling family, but the bad news is that neither side wants any elections held for any position. Apparently all that hand-holding Mr. Bush did with the royals in Crawford did not change many minds and hearts- not royal ones anyway. And to prove it, the prince was today promoted to the post of second deputy prime minister, making him second in line for the throne. The king is the prime minister.

Iran: Reformists in Iran seem to be demoralized these days. Their favorite candidate, former president Khatami has decided not to run. It looks like the Iranian equivalent of George W. Bush, Mahmoud Ahmadinejad, has better re-election chances now than a few weeks ago, which is unfortunate. But in Iran it ain't over until election day. Iran's elections have been notoriously unpredictable: the last two presidents were underdogs who won against the odds, including the current one. Still, with petroleum prices 'stabilizing' from the exporters point of view.....

War for Pakistan: Pakistan is now more violent than Afghanistan. Mr. Obama was polite to refer to the "war in Afghanistan", but it should be Pakistan that worrries him. While the Afghan warlords are armed with old rifles and poppy fields, the Pakistan military and intelligence elements that surely support the Taliban and al-Qaeda are one coup d'etat away from a nuclear arsenal.

Cheers

mhg