In conjunction with the ECB, Germany and France have reached a deal to allow for "selective" default on Greek debt. Judging by the reaction in financial markets, this counts as progress.
With the euro rallying sharply vs. the dollar, the sovereign debt of Europe's PIIGS rose Thursday while Treasuries fell, commodities climbed and stocks surged as the "risk on" trade was back in favor. In recent trading, the Dow was up 1.2% while crude was up 1.5% and had earlier traded above $100 per barrel for the first time since June 10.
Meanwhile, U.S. politicians continue to wrangle over a deal to raise the debt ceiling by the end of the week, which is when the Obama Administration says a framework must be agreed upon so there's enough time to get legislation passed prior to the Aug. 2 deadline.
Which brings us to the question of the day: Who is handling their debt crisis better, America or Europe?
Tempting as it may be to say "neither," the fact Europeans are now willing to accept a default on Greek debt — selective or otherwise — suggests the Continent is ahead of the Colonies at this juncture.
"When somebody has debt that's impossible to deal with, you restructure the debt," says Howard Davidowitz, whose eponymous firm specializes in retail restructuring. "A lot of the debt has to be dead. Unless you restructure that debt, the problem will go on forever."
Speaking of the situation in Greece, Davidowitz says "German taxpayers are not going to put up with this crap, nor should they."
And the same can be said of American taxpayers.
"Eventually the American taxpayer will get so fed up with these bunch of morons in Washington — Republican and Democrat — they are going to demand we take real action with real numbers; cut thru the crap and start dealing with this debt and we can do it," Davidowitz says. "Why did we say in U.S. 'the bondholders can't be hurt?' What the hell was that about? It was all mad."
Like most observers, Davidowitz expects Congress will come up with a short-term deal to at least temporarily raise the debt ceiling and allow the madness to continue.
"I think we'll get something for six months, a deal these morons can get their arms around…and keep screwing around, kicking the can down the road and do nothing," he says.
In other words: It's the same old story. Same old song and dance, my friends.