In a rare dose of realism, Reuters reports that the BOE's Monetary Policy Committee member Adam Posen said there is a distinct chance the UK economy could slip back into a recession. Not surprisingly, the BOE member said eurozone public sector cuts would add as a drag on the UK economy. He also added that he hopes the recovery would continue but it can not be guaranteed. As the BOE has demonstrated no problems in the past with activating money printing QE episodes, is this merely a preamble to yet another round of English quantitative easing? As was pointed out on Zero Hedge over the weekend, recent changes in excess reserves in the US have provided the implicit benefit of nearly $200 billion in new Fed money entering the pursuit of risky assets, and everyone knows that the ECB is now on crash course with Germany over its own most recent monetization regime. It should thus come as no surprise that the UK feels alone and will likely do all it can to pursue the same currency devaluation techniques that seem to be prevalent across the globe, and not be left too far behind.

The big news out of Europe this morning, and the reason for the drag on the euro is an article in Der Spiegel, "Merkel's rules for bankruptcy" according to which Germany is now actively (and very secretly) pushing for a plan outlining a set of insolvency rules, which would require that private investors bear a portion of the rescue burden, and much more importantly, would see at least a partial give up in state sovereignty, where a new insolvency trustee (the "Berlin Club", which we fail to see at least for now, how it differs from the Paris Club) would take implicit control over and override a default nation's treasury, in essence pushing the bankrupt country into a form of Feudal vassal state-cum-reparations subservience. Welcome to financial warfare in the post-globalization period.

With the imminent launch of the Q2 earnings season, below is a summary of consensus for year-over-year top and bottom line performance. In summary, the outlook is for a 12% pick up in top line YoY (ex fins), and pretty much staying flat at that level of outperformance for the next 2 quarters, and for a 41% rise in EPS compared to Q2 of 2009 per Bloomberg consensus estimates. For those looking for further granularity, David Rosenberg presents a detailed break down sector by sector, and warns of the risks to betting it all on the earnings parade, even as analysts are once again at near all time record bullishness on stocks.As a reminder, the consensus view is for a 2010 absolute EPS of 82, and for a simply ridiculous all time record 96 in 2011, higher than the 88 seen all the all time high three years ago, when the economy had the benefit of a multi-trillion shadow credit system. Who knows, maybe the Fed can take over that full responsibility as well.

• Kan election loss may impede effort to cut debt (Bloomberg)
• Chinese Dagong credit rater gives China higher credit rating (AA+, stable) than US (AA, neg outlook) (BusinessWeek)
• Staring into the abyss (Economist)
• Bank profits depend on debt-writedown abomination (Bloomberg)
• Niall Ferguson: "A US debt crisis is on its way" (TechTicker)
• If BP asset purchase rumors are true, Apache is about to incur a whole lot of extra debt (Bloomberg, WSJ)
• Housing gets sick on Keynesian rollercoaster (Bloomberg)

• Australian home-loan approvals climbed in May, first gain in eight months
• Bank of Korea raises country's 2010 growth forecast to 5.9%.
• Big election losses could hinder Japan ruling party attempts to revive economy.
• China shares rise led by banks and property developers.
• Euro falls below $1.26 in morning European trading; pound also lower.
• Frankfurt airport passenger numbers up 7 percent on year in June, 1.4 percent in 1st half.
• French President Sarkozy to go on national television amid scandal involving L'Oreal cosmetics.
• Taiwan Central Bank seeks to curb housing speculation as prices surge 20%
• Oil falls to near $75 in Asia.
• Yen weakens against Euro on Japan elections; Asian exporter stocks advance.

Sometimes, when chasing the bouncing ball of fraud and corruption on a daily basis, it is easy to lose sight of the forest for the millions of trees (all of which have a 150% LTV fourth-lien on them, underwritten by Goldman Sachs, which is short the shrubbery tranche). Luckily, Charles Hugh Smith, of oftwominds.com has taken the time to put it all into such simple and compelling terms, even corrupt North Carolina congressmen will not have the chance to plead stupidity after reading this.