Short Term is all they have to play with.

Today after opening way down yet again, Europe’s exchanges have clawed their way up. London is positive, Paris is 0.5% down with only Frankfurt still down 2,5%.

While in America futures have been up and down faster than a whore’s draws. Which is most un-pc but chosen advisedly. Because that is how the markets see the Fed – their whore. And they are feeling bullish that just as the ECB was threatened into going on yet another print and buy bank bail out, buying Italian toilet paper, so this afternoon the Fed too will announce a return to print and buy. And because that is what they expect they are seeing the chance for a quick and sizable profit by buying now at the low and then selling later today or in the next couple of days at what they hope will be the top of the bounce.

Some of those who have taken a pummelling recently, particularly teh Big banks, may also chose this moment to buy back some of their own shares or debt while it is cheap.

But while this may make a short term bounce and profit for the quickest and the ‘best informed’ what will it then do for America’s debt woes? The Fed will not be able to do anything of the scale of TARP without blowing another huge hole in what little is left of America’s debt rating and credibility.  They could signal a return of the POMO (Permanent Open Market Operations) as a drip feed of easy money. That might keep the euphoria going for  while at less cost and damage than a full on QE3 binge.

But once any of these short sighted actions are priced in and the private profits duly taken from the public expenditure, then what?

The answer in America, I think, is that the show down between the few ragged remnants of the forces of the rule of law who are still trying to uphold some sense of accountability upon the banks and the political elite who care not a stale fart for any laws that harm them or their interests, will be ratcheted up. AIG has filed suit against Bank of America and that is inconvenient for those who would like the law to be shut up in a box and told to keep their noses out of things for a few years. But despite that I think there will be a bigger push to close down legal actions against the banks from Public Prosecutors.

In Europe we have a little light looting to contend with and austerity measures to enforce with full force. The markets want to hear lots of pronouncements about how austerity measures are going to be toughened, brought forward and enforced. Not a great moment to make such pronouncements but the markets won’t be in the mood for tact. They will say to those whose favours they long since procured, ‘We don’t care about public sentiment. Its investor sentiment we care about. So here’s the approved script. Say it. I watch with interest to see what Burlusconi, and Cameron will say about their austerity measures in the face of growing unrest.

Cameron’s problem is civil disorder. Manchester must be next to see some fire setting. Burlusconi’s problem is is credibility. I fear that for many when they hear Italian Austerity Measures to be enforced, they are seeing in their mind’s eye the famous WWII picture of an Italian Tank surrendering to a lone Tommy.  It may be unfair and even wrong but it’s what people will think anyway.

Meanwhile Hungary continues to sink unseen and unremarked among the greater conflagration. But it is going to add to the misery. Latest is that a the leader of the largest group if regional and municipal governors said yesterday that a one month moratorium on municipalities paying their debts won’t be enough. He said three months would be needed. People, that is a default.

The government is not agreeing to it, but if that is what is being said and said more loudly as the days go by then it means something nevertheless.

And on the other side of the world watch out for Korea. Public indebtedness is cresting like an angry wave. It has been for a while now. Wages are low and the banks are sitting on a great deal of debt about to go bad. Now with foreign funds and funding flooding out of the country, Korea could deliver a nasty surprise.

And last Israel. With America downgraded and forced to look for savings Israel could be in trouble.