Vince Farrell of Scotsman Capital-Verbatim

From: vince farrell

Sent: Friday, February 22, 2008 9:01 AM

Headlines this morning include news from the Balkans that following Kosovo's declaration of independence from Serbia, rioting and unrest are widespread. The 2 million ethnic Albanians that live in Kosovo have long bristled at the Serbs domination. This area was the scene of horrific ethnic cleansing in the 1990's, ended only after American intervention. If this brings back foggy memories of what can best be described as a mind-boggling maze of confusing national boundaries formed after the collapse of the Yugoslav Republic, you are not alone. Read David Halberstam's "War in a Time of Peace" if you want the best, clearest explanation of the lay of the land. Halberstam was a national treasure who died earlier this year. I once mentioned his most recent book "The Coldest Winter" about the Korean War. I have enjoyed everything he has written and "War in a Time of Peace" is worth the effort.

Another headline this morning comes from the European Union. The EU cut its growth forecasts saying the weakness in the U.S. is spilling over and hitting their economies harder than they had expected. A slowdown in the U.S. impacts exports especially from Germany which is the largest economy in the EU. France and Spain are also showing pronounced signs of weakness. The inflation rate in the EU is 2.6%, above the 2% target and they are almost paranoid about inflation. The U.S. Federal Reserve bank has cut interest rates 5 times in the last five months, but the European Central Bank hasn't cut rates in five years. I believe the ECB has no choice but to cut rates and remember that inflation is a lagging indicator.