Reporters chase politicians . . . because that’s what reporters do.  Politicians think about politics . . . because that’s what politicians do.  It is not surprising that the current perception of the crisis is a struggle between Germany to exercise greater control over the individual governments of Europe versus the other nations who don’t want to surrender their sovereignty to Germany.  This is a political conundrum that cannot be solved on a timely basis.  As George Soros has pointed out — Europe only has three months left to resolve this problem.  Unfortunately, Europe cannot make any kind of decision right now.

As some pundits have observed, Europe is reaching the limits of democracy; where the weight of democracy makes it too difficult or too slow to solve problems.

So, is Europe doomed to a future with savages running up and down the Champs d’Elysees in Paris?  No!  The Cavalry will arrive.  The crisis will be resolved . . . but not by the politicians.

Except for TARP, the politicians in this country were less than useless in braking our economic fall.  Bernanke at the Fed did more to help end our financial crisis than all 535 members of Congress.  The same will happen in Europe.  There will not be a “big sloppy kiss” among the European leaders.  Instead, there will be a rather mundane announcement that the bankers and their regulators are working together differently.  It will subtly transfer some control over banks from individual nations to the ECB or some new “cooperative.”  An example would be an announcement from the ECB that it would begin allocating bond portfolio holdings among the various banks across Europe.  This would allow the ECB to prevent banks from buying bonds issued by profligate member-nations.  It might be backed by an announcement that the IMF, the European Stability Mechanism (ESM), and the European Financial Stability Fund (EFSF) would make capital injections into each cooperating bank.

The solution will not look exactly like this, but it will be equally confusing!  The face of the Cavalry will be bureaucratic and boring . . . which means the bull will return over weeks, not days.  There will be ample time to reduce cash when this happens.

Just be thankful the Cavalry is coming . . .