As we begin the new week there is a lot to reflect upon. The Europeans are supposedly going to resolve the deadlock over how to repair the bailout of Greece. Their austerity program has not worked and Greece now needs further funding and as part of the package the European leadership wants to ring fence Greece and prevent it from affecting other sovereign debt difficulties in other countries. They are also apparently considering increasing the terms of the haircut they want to impose on bondholders to as much as 50 %. The risk is that in so doing they will cause bond holders to flee other sovereign debt holdings of countries like Ireland, Portugal, Spain and Italy.

The rate of unemployment rose in the U.K to 8.1 % and 2.57 million . In the U.S. it remained at 9.1 % and in Canada it dropped to 7.1 % but was 7.6 % in Ontario and 7.3 % in Quebec. It is much lower in Manitoba, 5.5 %; Saskatchewan 4.6 %; Alberta 5.6% and B.C. 6.7 %. The high unemployment in the U.S. and the Republican refusal to pass the Jobs bill seems to have fuelled the political anger of many jobless left and liberal citizens who are supporting the growing ”Occupy Wall Street” movement. So long as the protests remain peaceful they can contribute to reinforcing the will of legislators to ensure that regulation is improved and also to pressure conservative politicians to rapidly adopt major stimulus measures.

The neo-cons have counterattacked strongly claiming that Keynesian measures will not work and crying wolf about deficits. But as Paul Krugman correctly observed on CNN this afternoon all the scientific evidence still backs  properly conceived and implemented Keynesian stimulus and claims to the contrary are merely repeating the economic fallacies of the 1930s and the more recent rational markets school that led us to this debacle.