For both, authorities remaining fixated on finance looks untenable as it leaves the impression for the common man, of an official attitude of let them eat cake – as politically unacceptable today as then for Marie Antoinette. The environment indicates for capital markets, a continuation of risk premium re-appraisal and volatility that started from Europe but now also has a stronger global political dimension than is likely fully understood. Tough US budget reconciliation lies immediately ahead. In Europe, from Ireland to France to Greece, a populist backlash has mounted over benefit cuts versus financial largesse. In emerging economies, the brutally suppressed revolts in Iran and Thailand of mid 2010 have expanded into Tunisia and the Middle East. Considerable angst on inflation exists in major countries like of China and India. It all has at least partially to do with reaction to the distribution of costs (perceived by the poor) and benefits of globalization (visibly by the affluent, well connected).
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