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In the US and Europe we have slowly come to the realization that traditional accommodative economic policies leave, and have left, the real economy limp.  Wildly divided governments don't help, but beyond the fact that western decision making bodies are polarized, it is abundantly clear that the panacea for the global economy is not even on the table right now.  The western world has been thrown into a bout of sovereign game theory, and by the constructs of game theory itself, one country will "win," while everyone else will lose to varying degrees.  But that we are such a highly integrated global economy--the reason the whole world is heading towards recession right now--means that a solution must incorporate every economy around the world.  The current game Europe is playing is bound to fail because if one country gets their way, others lose by definition.

• EU talks up Spanish banks package, markets skeptical (Reuters)
• China’s Import Growth Misses Estimates For June (Bloomberg)
• The monkeyhammering continues: Paulson Disadvantage Minus Fund down 7.9% in June, down 16% in 2012 (Bloomberg)
• Draghi pledges further action if needed (FT)
• JPMorgan Silence on Risk Model Spurs Calls for Disclosure (Bloomberg)
• Norway's Statoil to restart production after govt stops strike (Reuters)
• Top Fed officials set table for more easing (Reuters)
• Euro-Split Case Drives Danish Krone Appeal in Binary Bet (Bloomberg)
• Obama Intensifies Tax Fight (WSJ)
• Europe Automakers Brace for No Recovery From Crisis (Bloomberg)
• Boeing’s Air-Show Revival Leaves Airbus Nursing Neo Hangover (Bloomberg)
• Libor Woes Threaten to Turn Companies Off Syndicated Loans (Bloomberg)

Netflix stocks surged more than 21% in one week primarily due to an upbeat Facebook update from the company's CEO.

So where does this leave us, knowing that despite all the exuberant highs and depressed lows, we had ended the previous week pretty much in unchanged matter?

Well, after a 10-day period that had not one but 2 bail-outs announced, a EU summit that initially seemed to good to be true, results-wise, and then ended up just being that, and a triplet of Central Bank cuts cum QE supportive measures, things don’t look much better…

But please don’t tell me that you are surprised that Barclays was “manipulating” LIBOR.

Things in broke Europe are becoming stranger by the minute. Stepping away from the Bank of England telling private institutions what to do, and overriding fiduciary responsibility, we now shift to France, but not in the context of the Second Great Socialist Revolution and its Fairness Doctrine annex, but to the home and office of ex-president Nicholas Sarkozy whose home and office where just raided according to Politique in connection with long-running allegations that his presidential campaign had been illegally funded by France's richest woman Lilliane Bettencourt. Do you see what happens Larry when there are no PACs and it is illegal for rich people to outright bribe politicians?

From bull market gods and goddesses of the 1980s and 1990s, stock analysts now preside over a much more modest kingdom.  Nic Colas, of ConvergEx notes that the world has moved on to new golden calves, from currencies (with great leverage) to exchange traded funds (with generally less volatility) to macro analysts (the current Zeuses and Heras).  This even extends to the world of the retail investor – there are far more Google searches in the U.S. for "Storage auctions" (246,000/month) than for "stock research" (just 33,000/month), and the rate of decline resembles a fast-decaying radioactive particle. With asset price correlations near 90% for a wide range of investment choices, the on-off switch to market direction sits in Washington, Frankfurt, Beijing, and other centers of political and central bank power. Nic believes stock research will make a comeback for both technological (systemically delivering information to algorithmic traders) and cyclical reasons - as old-school stock research, with sector analysts, is ultimately tied to the fortunes of the equity market. And for analysts and stock market investors, that inflection point cannot come too soon.

"A massive cesspit."

• Funny WSJ headline: Berlin Blinks on Shared Debt  (WSJ)... sure: if XO hits 1000 bps tomorrow, Eurobonds in 2 days
• Barclays $451 Million Libor Fine Paves Way for Competitors (Bloomberg)
• Fed officials differ on whether more easing needed (Reuters)
• China Local Government Finances Are Unsustainable, Auditor Says (Bloomberg)
• Just because the NYT is not enough, Krugman has now metastasized to the FT: A manifesto for economic sense (FT)
• Merkel dubs quick bond solutions ‘eyewash’ (FT)
• Yuan trade settlements encouraged in SAR (China Daily)
• Katrina Comeback Makes New Orleans Fastest-Growing City (Bloomberg)
• European Leaders Seek to Overcome Divisions at Summit (Bloomberg)

• France to Lift Minimum Wage in Bid to Rev Up Economy (WSJ)... weeks after it cut the retirement age
• Merkel Urged to Back Euro Crisis Measures (FT)
• Monti lashes out at Germany ahead of summit (FT)
• Italy Official Seeks Culture Shift in New Law (WSJ)
• Migrant workers and locals clash in China town (BBC)
• Romney Would Get Tough on China (Reuters)
• Bank downgrades trigger billions in collateral calls (IFRE)
• Gold Drops as US Data, China Speculation Temper Europe (Bloomberg)

Nearly two weeks ago we penned "These Three Spanish Banks Will Be Downgraded Tomorrow" which showed which banks had a rating higher than the sovereign following Moody's long overdue Spanish downgrade, and thus were about to be downgraded by many notches. Today, after a ridiculously long delay whose only purpose was to buy time, Moody's is about to junk virtually the entire Spanish banking sector, as was widely expected.The downgrade is expected to happen within hours.

• Merkel Backs Debt Sharing in Germany Amid Closer EU Push (Bloomberg)
• With a ruling as early as today, here are four health care questions the Supreme Court is asking (CBS)
• George Soros - Germany’s Reticence to Agree Threatens European Stability (FT)
• China Stocks Drop to Five-Month Low (Bloomberg)
• The New Republic of Porn (Bloomberg)
• That's a costly detached retina: Greek Lenders Postpone Mission to Athens (FT)
• Spain Asks for Aid as EU Fights Debt Crisis (FT)
• Wolfgang Münchau - Why Mario Monti Needs to Speak Truth to Power (FT)
• U.S. Banks Aren’t Nearly Ready for Coming European Crisis (Bloomberg)
• MPC Member Wants £50bn Easing (FT)
• India Boosts Foreign Debt Ceiling by $5 Billion to Defend Rupee (Bloomberg)

We have no doubt that everyone is tired of bad news, but we are compelled to review the facts: Europe is currently experiencing severe bank runs, budgets in virtually every western country on the planet are out of control, the banking system is running excessive leverage and risk, the costs of servicing the ever-increasing amounts of government debt are rising rapidly, and the economies of Europe, Asia and the United States are slowing down or are in full contraction. There's no sugar coating it and we have to stop listening to politicians and central planners who continue to downplay, obfuscate and flat out lie about the current economic reality. Stop listening to them.

News & headlines from the day

• Greek radical leftist SYRIZA leader Tsipras says will not join coalition government (as expected)
• Egypt Islamists claim presidency as army tightens grip (Reuters)
• French Socialists vow reforms after big poll win (Reuters)
• Greeks Back European Bailout (WSJ)
• France, Socialists Win a Solid Majority (WSJ)
• Denmark Warns over Pressure on Krone (FT)
• Obama to press Putin on Syria at G20 amid skepticism (Reuters)... Putin to smile
• China Home Prices Fall in Record No. of Cities (Bloomberg)
• Europe Gets Emerging Market Crisis Ultimatum As G-20 Meet (Bloomberg)
• Wolfgang Münchau – What Happens if Angela Merkel Does Get Her Way (FT)