This morning’s key headlines from GenerationalDynamics.com.

• Hopes for a euro solution next weekend fade as the hours pass
• Moody’s warns France about its AAA debt rating
• Kenya’s army prepares to fight the ‘Mother of all Battles’
• Use of heavy weapons grows in Sanaa, Yemen
• U.S. deploys troops on border with Pakistan

Hopes for a Euro Solution Next Weekend Fade As the Hours Pass

Wolfgang Schäuble, Germany’s Federal Minister of Finance (AFP)

I like to say that days like Monday would be totally hilarious, if the consequences weren’t so serious. During the last two days, the G20 (Group of 20) world finance ministers and central bankers met to find a way to end the world financial crisis, expecially in Europe. The tone was set by US Treasury secretary Timothy Geithner, who said that the Europeans had “six days to save the world.” He was referring to the October 23 (Sunday) meeting. You’ll recall that I recently reported that French President Nicolas Sarkozy promised that “By the end of the month, we will have responded to the crisis issue and to the vision issue.” Well, expectations for next Sunday’s meeting have been sky high, as the Europeans have promised to announce three things:

• A plan to end Greece’s crisis, by allowing it to default, by increasing the previously announced “haircut” on Greek bonds from 21% to 50% or more.
• A plan to recapitalize large European banks, after they lose 50% or more on their huge holdings of Greek bonds.
• A plan to expand the long-term rescue fund, so that future crises can be averted.

Unfortunately, the math doesn’t work out. If the problem were just Greece, perhaps they could find a solution. But if Greece defaults, then the “contagion” will cause Italy and Spain to default, and then there won’t be enough money to bail everyone out. As we’ve said many times in the last two years, there is literally no solution to these problems. If any solution existed, they would have found it by now, but none exists. Bloomberg

Moody’s Warns France About Its AAA Debt Rating

Expectations were very high on Monday morning that the Europeans would come up with a master plan to save the world next weekend. But then Moody’s put France on notice that it could soon lose its AAA rating, joining Italy and Spain (and the U.S.), which have already lost their AAA ratings. And then Germany’s finance minister, Wolfgang Schäuble, announced that there would NOT be a “big bazooka” rescue deal on Sunday, as analysts are hoping for. His remarks caused markets to plummet. According to one analyst, “German officials clearly decided that a degree of expectation management was needed, and a statement was made warning that if anyone expected a package to be in place by next Monday then they were setting themselves up for disappointment.” Guardian

Kenya’s Army Prepares to Fight the ‘Mother Of All Battles’

Kenya invasion of Somalia (BBC)

Faced with repeated kidnapping of French and Spanish aid workers by al-Shabaab terrorists from Somalia, as well as attacks on refugee camps on Keyna’s soil, Kenya’s army invaded Somalia on Sunday, backed by helicopters and tanks, and supported by bombers. Both Kenyan and Somali government forces are headed for the region near Qoqani, over 600 km south of Mogadishu. Al-Shabaab has mobilised hundreds of fighters and confiscated vehicles to transport them to the same region, with a major battle expected in the coming days in the nearby town of Afmadow. Al Shabaab spokesman Sheikh Ali Mohamud Rage has threatened terror attacks on Kenyan cities. “Kenya has peace, its cities have tall buildings and business is booming there, while Somalia is in chaos. If your government ignores our calls to stop its aggression on Somali soil, we will strike at the heart of your interests,” he said in an address intended for the Kenyan population. The Nation (Nairobi)

Use Of Heavy Weapons Grows In Sanaa, Yemen

Rockets, mortars and heavy machine-guns are being increasingly used in Sanaa, the capital of Yemen, in battles between the government forces of president Ali Abdullah Saleh versus the tribes and rebels opposing the government. Saleh accuses his oppoents of trying to stage a coup. “They are insane people who can’t sleep and only want to take power.” BBC

U.S. Deploys Troops On Border With Pakistan

Reports are surfacing that the U.S. has moved hundreds of new troops to the Afghanistan area bordering Pakistan’s insurgent infested North Waziristan tribal region, along with heavy artillery, helicopter gunships and sealed movement on the border. The abrupt deployment of US forces near the border area with Pakistan has escalated tension in the militancy plagued North Waziristan tribal region, as U.S. forces immediately sealed the main road connecting Pakistan border town of Ghulam Khan and Khost for traffic. Pakistani security officials have confirmed the development, but there is no word from U.S. and Nato forces. Times of India