The Europeans Respond

By Kevin Freeman
October 22, 2011Oct 22, 2011

We have posted about the attacks on Europe, where they started and what the likely outcome will be. This past week, we saw a couple of developments worth noting. First, there is a Europe-wide ban on naked credit default swaps beginning November 1st. It follows a ban instituted in Germany last year that provided some relief but was circumvented through surrounding nations. The new law also provides limits on naked short selling. According to a Reuters report on CNBC:

The European Union agreed on Tuesday to ban "naked" credit default swaps (CDS) on sovereign debt in an attempt to curb what some policymakers see as hedge fund bets on the euro zone crisis…

"It is a very ambitious accord which strengthens financial stability and strengthens the single market for financial services," Michel Barnier, the EU's financial services chief, told a news conference to announce the deal.

The law, which also includes conditions and reporting requirements on shortselling shares, will take effect from Nov 1, 2012 on new contracts.

It should be understood that this effort demonstrates what we have been saying for years. The European regulators have recognized the serious vulnerabilities created by naked short selling and naked credit default swaps. Unfortunately, American authorities have not yet properly addressed the problem. This may be because the crisis currently appears centered in Europe. If we are right, however, it will be coming here sooner than we would like.

The second major European development is a push to full economic integration as a United States of Europe. We have already described this in detail as The Soros Solution. We believe that such an action will provide an alternative bond market that would allow Phase Three economic warfare to accelerate in earnest. This would remove the final barrier to Chinese dumping of U.S. Treasuries as a combined European debt market would be deep enough to absorb their excess reserves.

From the UK Telegraph today:

New euro 'empire' plot by Brussels

European Union chiefs are drawing up plans for a single "Treasury" to oversee tax and spending across the 17 eurozone nations.The proposal, put forward by Herman Van Rompuy, the European Council president, would be the clearest sign yet of a new "United States of Europe"…

Bottom Line:  Nearly every day there are headlines that demonstrate the concerns we have been sharing.

All posts Copyright (c) 2011 Kevin Freeman, All Rights Reserved