The recent Greece default has lit the fuse. Will it ignite the bomb?
The President of France has come up with a very creative way of solving the European debt crisis. On Sunday, a piece authored by French President Francois Hollande suggested that the ultimate solution to the problems currently plaguing Europe would be for every member of the eurozone to transfer all of their sovereignty to a newly created federal government. In other words, it would essentially be a “United States of Europe”. This federal government would have a prime minister, a parliament, a federal budget and a federal treasury. Presumably, the current national governments in Europe would continue to function much like state governments in the U.S. do. In the end, there may be some benefits to such a union – particularly for the weaker members of the eurozone. But at what cost would those benefits come?
For the moment, the debt crisis in Europe just continues to get even worse. Greece, Portugal, Ireland, Italy, Spain, Belgium and France are all drowning in debt……
In particular, keep on eye on the big banks. Just like in the United States, the “too big to fail” banks in Europe are massively overleveraged and are tremendously exposed to derivatives.
In fact, the bank with the most exposure to derivatives on the entire planet is Deutsche Bank. It has been reported that Deutsche Bank has a whopping 75 trillion dollars worth of exposure to derivatives, their co-CEOs were recently forced to resign, and there are all sorts of rumblings about troubles going on behind the scenes at the bank.
What do you think would happen if the biggest and most important bank in Germany suddenly became the next Lehman Brothers?
Definition of derivatives according to Investopedia:
A security whose price is dependent upon or derived from one or more underlying assets. The derivative itself is merely a contract between two or more parties. Its value is determined by fluctuations in the underlying asset. The most common underlying assets include stocks, bonds, commodities, currencies, interest rates and market indexes. Most derivatives are characterized by high leverage….
Derivatives are generally used as an instrument to hedge risk, but can also be used for speculative purposes.
In other news:
On June 4, Oklahoma joined Utah, Texas, and Louisiana in affirming that gold and silver coins are (as they always have been under the Constitution) legal tender in the payment of debts in the state. On the surface this seems almost nonsensical: affirming a right that already exists in Article I, Section 10 of the U.S. Constitution. But it is much more than that….
Go to now, ye rich men, weep and howl for your miseries that shall come upon you. Your riches are corrupted, and your garments are motheaten. Your gold and silver is cankered; and the rust of them shall be a witness against you, and shall eat your flesh as it were fire. Ye have heaped treasure together for the last days. James 5:1-3
Babylon leads the pack