Europe got two major problems now - last week it only had one!

I think it is important to realise that not only the ECB but Europe overall is facing two major issues:

1. As of Monday - post the crisis in Greece - we only had "solvency crisis" - i.e Mark-to-market most south european countries are bankrupt (plus Ireland + UK + US)
2. ...but now.... we can add LIQUIDITY crisis - The rush for buying US dollar for funding of banks balance sheet.

ECB has been praising themselves for not doing QE - but ECB will have to move to CREATE LIQUIDITY - effectively buying Greek+ Spanish+ Portugese bonds.... This is major change and yet another blow to Mr. Trichet, which much like Mr. Greenspan has been riding high during his tenure as ECB head, but will go down in memory as yet another bureaucrat who failed to live up to the independence needed when everyone is creating LEVERAGE and morale risk  left-right-and- centre...

Today may be too early, but the situation is deterioating minute by minute, we expect this:

ECB does QE ==> Bunds sells off ==> EUR gets short relieve ==> GOLD EXPLODES ==> Stocks have 1 day to 1 week relieve ==> Then market realise that ECB can only deal with the # 2 item - i.e liquidity - the SOLVENCY crisis we started with on Monday is still in place.

Bottom line:

There is major risk of some sort of rebound inside next 48 hrs - but the long-term game has started ....retest of lows in S&P 666.00 

We learned NOTHING from the crisis in 2008 - the only difference from late 2007 to now being the GOVERNMENT BALANCESHEETS are totally toast and the world is facing massively higher taxes and regulations.