Libya War Rages On

Fundamentals: The stock market wants the Federal Reserve to implement QE3, printing money out of thin air to buy government bonds. Bernake knows QE3 is a horrible idea but he doesn't want to spook the markets with honesty, so he essentially said,"Probably no QE3, but maybe, we'll see in September." In a childish mood, the market took maybe as yes and rallied.

Also on Friday, Euro-zone ministers are trying to rescue the Greek bail out package, which is falling apart as Finland demands hard liquid collateral for its share of the rescue fund. Finland has talked Greece into siphoning off part of the bail out loan package and putting it into a separate account that insures Finland (and only Finland) suffers no down side. Of course all the other European creditor nations want the same deal, which will derail the bail out, force Greece to default, and destroy the world economy. Germany is trying to get Greece to give state owned real estate to the various creditor nations as collateral. If Germany succeeds, then the new bail out package is much better than the original because it would be more free market, much tougher, and it would result in harsh foreign owners taking over Greek state owned assets if payments are not met: tough love. If Germany fails, we're all screwed.

Long War: The conventional stage of the Libyan War rages on. Gaddafi still controls a sizable chunk of the country. NATO war planes and drones are operating at the same tempo as before. In one sense, the longer the conventional phase lasts, the better. It is a good thing if Gaddafi's forces are ground to dust in a conventional onslaught. It is a good thing if the bad guys fight to the last man in set piece battles and are utterly defeated. If this happens, then the guerrilla phase of the war will be much smaller.

Perhaps sensing that a horrible enemy is emerging in Libya with the new (battle hardened and pro-American) rebel government, AQIM (Al-Qaeda North Africa) is moving into Nigeria. Islamic attacks in Nigeria are exploding. This is crippling oil production and doing as much harm to the world economy as shutting down Libyan oil production. Obviously this widens the North African aspect of the Long War and guarantees that fighting will continue for decades even if the rebels win 100% in Libya.