All of this volatility is due to the European debt crisis. 

The market has been trying to send a message to European politicians, a powerful one.

Three governments collapsed during this period.

Greece started all the mess, followed by Spain due to protests over austerity measures, and finally in Italy the government went under when its borrowing costs reached an unsustainable level above seven percent.

The message is clear and policy makers are not moving as fast as the economic snowball.

From one summit to the next, decision makers were not  able to solve or even secure a way out of the crisis. Finally, during the latest EU summit, they put forward a “fiscal compact.” 

They stopped treating solvency problems with more liquidity and approved a new mechanism to monitor fiscal policies and deficits of member governments at an ultra-government level.

It was proposed that the European Commission would be responsible for this fiscal surveillance. 

Europeans are finally convinced that they can live their lives the way they want, but they need to run their economies in the German way.

British Prime Minister David Cameron vetoed the idea of giving up sovereign decisionmaking in shaping the UK’s  fiscal policy, saying that such a concept was not good for Britain.

All 26-member of the EU voted yes for the new changes to the EU treaty except Britain. So rather than altering the EU treaty itself, the euro zone members agreed on  smaller scale fiscal policy monitoring.

David Cameron’s decision has been highly criticized. 

Many pundits believe it will lead to the isolation of  the UK, and consequently, hurt the UK economy.

The main reason for Cameron’s decision to veto the new treaty is that he did not get any exceptional treatment for the City of London.

As a global financial center, London attracts an enormous amount of money to the UK and a huge financial industry is based and dependant on this financial influx.

Throughout the recent financial calamities, the world has moved even further away from the concept of a  “financial industry,” blaming it for the global crisis of 2008.

With more regulations and high capital requirements, the industry is retiring to its previous role as a service provider.

Some American bankers see the change in the financial industry as inevitable in order to achieve the goal of sustainable growth.

The lesson is well learned in Germany, France and even Iceland, which  allowed its financial industry to grow larger than its GDP, transforming the entire nation  from breadwinners to beggars.

Cameron seems to be the last soldier defending the old Anglo-Saxon “banking industry.”

Will this be his last stand? Or can he benefit from both, trade partnership with Europe, and London’s money supply at the same time?