There's not really much to say in the Fault Lines department. Things seem to grind along without much better or worse. This should certainly be NOT be taken as an indication that the crisis is over, or even ending, however the probability that we are able to grind along back to normality has increased. In some ways this is a shame. Grinding along to normality may take 10 to 15 years, and there must be a quicker way to heal the wounds and move on. TRG is going to take a break from the Fault Line predictions, but the following issues will still interrupt his sleep:
Spain, Italy and Portugal staged major strikes yesterday, and the public mood across Europe has turned decidedly against austerity. Regardless, every batch of politicians plays from the exact same script. There exists an extremist fringe in Europe, but up until now they have not been able to front a leader who can effectively rally the masses. Will the extremists produce a movement before the standard politicians bumble their way out of the debt mess?
The real frontier of the crisis is not Spain or Italy, it is the UK, France and even Germany. Take the UK first, the shrinking in the financial sector is putting a major drag on London, and since London is the last bright spot holding a very shaky housing market together, things do seem likely to get a bit worse. France is full of problems, Hollande is losing credit with his people fast even though he has been pretty good at threading his way through a hopeless situation. What's wrong with Germany? First off the population thinks they are economically superior to the rest of Europe, and that sort of overconfidence can make for painful realizations. Germany's state banks are not particularly stable, and even the great Deutsche Bank is pretty threadbare when it comes to capital.
Crisis on Entirely New Front
The world is shaky right now. The US is facing another political crisis, Japan is realizing that a lost decade is actually starting to look like a lost future. China is going through a change of guard. There's potential for problems everywhere.