It is now clear that 2012 will continue to be a year of continued volatility and uncertainty. Obama was AWOL for the deficit talks, the committee was selected to fail before it even started, and the partisan rancor will just get even worse as the election comes closer, if that is even possible. Veteran lawmakers who have been in Washington for over forty years say they have never seen anything so bad. Although there may have been major battles between the Republicans and Clinton , or others before them, they always, in the end, found a compromise. They always understood that the country came first. That is not the case now. Whether it is Obama and Pelosi, or the Tea Party, the extremes are in control and there is no grown up in the room. Obama has no experience and is in the end a leftist. Pelosi does not care what effect it has so long as what she says furthers her own career. People who know her well for over 25 years say she is not at all smart and is simply doing what is good for Nancy. She is already part of the 1%, so she does not care. The Tea party seems to have people who do not know what the word compromise means. Harry Reid just mumbles what he is told to say by the unions. In short there is no leader in Washington, and this is not going to change at all until the election. The result is the deficit will not likely get resolved and there will be huge fights over defense spending, which cannot get cut a lot further than it already is, and the tax rates on upper income people.

Europe is no better. The issues have been on top of the table for two years and nothing has really been done other than they have gotten far worse through a total lack of leadership out of Merkel and Sarkozy. It is not clear that Merkel even understands the issues or how banking really works. The Germans are petrified 70 years later that any move to reinflate and increase the money supply in a major way will again lead to the Weimar Republic situation, so for them it is emotional and not objective. The French fear for their banks. The Italians had been led by a guy who was not only totally corrupt, but preferred to chase seventeen year old girls, than to reform socialist labor laws and reinvigorate the economy. At least Monti fully understands the issues and has the brains and ability to propose solutions. With talented technocrats now in place in Italy, Greece and the ECB, there are a group of leaders who can at least try to get Merkel and Sarkozy to move in the right direction. In the end it is all about Germany and Italy.

Europe is now in a massive structural crisis. They need to decide if they are willing to make fundamental changes to the underlying socialist, union oriented style economy that the EU has lived under since the war. Italy and Greece especially have to completely change labor laws, entitlements, and the entire culture which has been the basis for life in those countries, that the government will take care of you cradle to grave and the big bad business owners cannot fire you. (You may recognize a familiar theme to that which is the Obama Pelosi political theory). For example, in Spain, which has had in excess of 20% unemployment for several years, life goes on as though there was no crisis because entitlements take care of monthly checks, healthcare and other needs. Cultural shifts of the magnitude required in Europe do not come without major upheaval of society, and we can expect more strikes, street violence and other major disruptions which then cause politicians like Merkel to back off the wrenching changes which are required. That is what we are witnessing and why the crisis will not get resolved for a long time. It should be a lesson to everyone in America about what happens when entitlements become embedded in society, and when 47% of the population pays no taxes, but the president claims the top earners are not paying their fair share. Class warfare does not lead to the compromise solutions which are required to build a solid future for the economy.