In a famous exchange between Chou En Lai and Henry Kissinger, the U.S. Secretary of State asked Chou what he thought of the French revolution. It being 1972, Chou answered it was too early to tell yet. The reason we bring this up is as the Greek tradegy unfolds it will take a German led bailout to keep the Greek government from defaulting. Today the German/Greek ten year note spread widened to 245  basis points and the German/Irish spread of like duration widened out 20 basis points to 200 basis points. Being that the European Union has no statute for a bailout, it will take a massive amount of transfers to shore up the Greek economy, let alone the rest of the PIIGS. Several pundits have imagined that the Greeks will get their debt situation under control by cutting public sector wages, but they seem to forget that this is a democratically elected socialist government. The chances of squeezing the unions has as much chance as going a day without seeing Obama on television making a speech. From a trading perspective the only way to play in this arena is to use the bund futures and the recently relisted Italian bond futures, both at the Eurex and denominated in EUROs. Check your system provider for the appropriate symbols—and no this is not a paid advertisement but a public service message. The question facing Europe is what political price the Germans will exact for any aid they may provide. So maybe it is too soon to determine who in fact was victorious in World War 2.

The calendar is heavy tomorrow with three central bank meetings. The Kiwi bank has already announced and they stayed at 2.5% but changed some language to suggest that they may move earlier to tighten than previously thought. The KIWI went bid against all the crosses but we think that this is an overreaction. The BANK of ENGLAND and The SWISS NATIONAL BANK both meet in the early morning but no change is expected from either. The Brits presented the pre-budget plan and it had to do with raising taxes and very few budget cuts. The middle class in Britain will carry the brunt of the hike but some red meat was tossed to the torch and ax crowd by placing a supertax on bank bonuses over 25,000 pounds. We will never defend the pay of bankers but this tax will go a long way towards subverting the role of London as a financial center. Sarkozy and Merkle [French and German leaders] are laughing in their Reisling. Europe is a mess and not getting out of this predictament anytime soon, yet the EURO held up fairly well today. It really makes one wonder where the safe havens are–we know the DOLLAR for lack of anywhere else, but the news from the U.S. today was not helpful. The Obama administration moved to extend TARP until October 3, 2010. This cannot be a positive event as this program was meant to be for the insurance of systemic financial solvency. But with the banks rushing to repay TARP funds what can the real purpose be–this is Paulson’s ghost as he jammed this through with little thought and much malice. Remeber his 3 page missive demanded that there could be no judicial review of Treasury’s actions. Oh, Expediency what has thou wrought! So risk may be declining but where does one go for wealth and capital preservation–oh well the gold/currency crosses seem to be the last bastion of financial rectitude. HMMMMMMMMMMMMMM

Tomorrow morning brings us the jobless claim number[463,000] is the guesstimate and that is followed with the trade number. The trade report was always a center piece for the currency world but because markets are dynamic this data has little relevance presently. If something way out of the ordinary is reported it could have a minor impact but most probably a yawner–negative 36 billion is projected just to prepare you. Tonight the aussie employment report came out and it was much stronger than estimated putting a bid to the AUSSIE DOLLAR. Also we wish to point out that Spain was given a negative outlook by S&P, presenting Europe with one more problem—something more to think about.