Are we about to see a huge push for a “United States of Europe”?  As the sovereign debt crisis in Europe continues to spiral out of control, suddenly this term is popping up in the New York Times and in major newspapers all over Europe.  Is this by accident?  Surely not.  The truth is that there is an overwhelming consensus among the political and financial elite of Europe that a “United States of Europe” is what would be best for the eurozone.  However, they are likely going to need a massive financial crisis in order to reach their goal.  [Let me explain.] Words: 1639

So says Michael Snyder (www.endoftheamericandream.com)  in an article* which Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), has further edited ([  ]), abridged (…) and reformatted below  for the sake of clarity and brevity to ensure a fast and easy read. The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.

Right now, the citizens of the countries that make up the eurozone are overwhelmingly against deeper European integration.  Without experiencing a massive amount of financial pain, they are unlikely to change their minds any time soon.  So who is going to win in the end?  Unfortunately, the clock is ticking because Greece is on the verge of defaulting on their debts and several other countries are not that far behind.  If Europe does not decide on a course of action soon, the euro is going to collapse and financial institutions all over Europe are going to come crashing down.

Up until now, EU leaders have been handling this crisis by putting out one fire after another.  This has been going on for a couple of years, but these bailouts cannot go on indefinitely.  Instead of fixing things, “kicking the can down the road” has only delayed the pain and made things even worse.

The EU, as it is currently structured, simply does not work.  The political will for more bailouts is rapidly drying up and politicians in Europe are only going to be able to “extend and pretend” for a little while longer.

[Below is what a number of key individuals are now saying about the current financial situation and what they think should be done to remedy the situation.]

Mario Draghi

Something needs to be done but instead of admitting that the euro was a massive mistake and returning to national currencies, most of the top politicians in Europe believe that “more Europe” is the answer. Mario Draghi, the incoming head of the European Central Bank, is totally convinced that Europe needs to integrate much more deeply….

“To cope with this, we must have a treaty change. The aim of this effort should be a quantum leap up in European economic and political integration.”

Do you notice that he is not just advocating small changes in the way that Europe works.  What Draghi wants is “a quantum leap” in European integration.

Jean-Claude Trichet

Draghi’s predecessor feels the same way.  Jean-Claude Trichet, the departing head of the European Central Bank, is also very much in favor of much deeper European integration….

“The crisis has clearly revealed the need for strong economic governance in a zone with a single currency”

Herman van Rompuy

Of course one of the biggest proponents of a “United States of Europe” has been Herman van Rompuy.  In a recent article, the Telegraph made the following eye-catching statement….

Herman van Rompuy is ready to run for a second term as EU president, at the head of a “United States of Europe”

Of course he would not be doing it for “personal glory”.  In the same article, he is quoted as saying he wants another term because “the work is not finished” and that he needs new powers in order to get it done….

Mr Van Rompuy has announced he is willing to take on the “unfinished” euro zone debt crisis with new powers setting an “economic government” in Brussels.

UK Prime Minister David Cameron

Top politicians in the UK are even promoting the idea of much deeper European integration.  Even though he insists that Britain will not join the euro, UK Prime Minister David Cameron is now publicly endorsing the idea that the eurozone form a “United States of Europe” in order to save the euro according to a recent article in the Daily Mail….

David Cameron was branded an EU ‘enthusiast’ by Tory Eurosceptics last night as he said Britain must let eurozone countries move towards a United States of Europe with a common economic policy.

The Prime Minister admitted he was not sure whether Germany and other countries had the political will to prevent a break-up of the single currency, but insisted they must be allowed to try – even if that meant closer integration.

It is funny how whenever there is a crisis in Europe, the answer that we are always given is that “more Europe” is the answer.

Antonio Borges

For example, Antonio Borges, director of the International Monetary Fund’s European unit, recently stated the following….

“To put the crisis behind us, we need more Europe, not less. And we need it now.”

In the past, European leaders were always very hesitant to use the words “United States of Europe” but now it seems like that term is flying around all over the place. It is almost as if they want to start getting us conditioned to the idea.

German Chancellor Gerhard Schroeder

Just check out what former German Chancellor Gerhard Schroeder said recently.  He has been one of the biggest cheerleaders for a United States of Europe….

“From the European Commission, we should make a government which would be supervised by the European Parliament. And that means the United States of Europe.“

Obstacles in the Way of a U.S.E.

So if all of these top politicians want this, why can’t they just do it? Well, there are some problems.

1. The EU treaties don’t really allow for a “United States of Europe”, and the recent decision by the German Constitutional Court has put up some huge roadblocks. For example, the German Constitutional Court seemed to kill off the possibility for any kind of “fiscal federalism” in the near future when they made this statement in their recent decision….

“The Bundestag’s budget responsibilities may not be transferred through open-ended appropriations to other actors. In particular, no financial mechanisms can lead to meaningful fiscal burdens without prior approval”

Not only that, but the court also clearly rejected the notion of “Eurobonds”….

“No permanent treaty mechanisms shall be established that leads to liability for the decisions of other states, especially if they entail incalculable consequences”

By using this kind of language, the German Constitutional Court has put up some massive roadblocks in the way of a “United States of Europe”.  It is probably going to take a new treaty in order to get it done.

2. The citizens of Europe don’t want anything to do with a new treaty would allow for a “United States of Europe”.  If such a treaty was put up for ratification at this point, it would be soundly defeated. For example, a recent poll found that 76% of the German people are opposed to any further German financial aid for Greece. In addition, another recent poll found that German voters are against the introduction of “Eurobonds” by about a 5 to 1 margin.

German Chancellor Angela Merkel is having a hard enough time just keeping support for the current Greek bailout together.  According to reports, there are 25 members of her own coalition that plan to vote against the revamped EFSF.  At this point it is unclear whether it will pass or not.

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As noted above, the political will for more bailouts is dying but without more bailouts, Greece will default and several other eurozone nations will follow.  It could also mean the potential for at least a partial collapse of the euro but if there is a massive financial crisis in Europe, it may start changing the minds of the voters about much deeper European integration…Once people start feeling severe pain, often they will start considering things that they would not have considered before.

3. A “united States of Europe” would mean a major loss of national sovereignty. Let us hope that European voters never change their minds, [however, because] deeper European integration may stop the current financial crisis, but it would also mean a tremendous loss of national sovereignty.

A Daily Mail article entitled “Rise of the Fourth Reich, how Germany is using the financial crisis to conquer Europe” contained the following sobering assessment of what deeper economic integration for Europe would mean….

This would entail a loss of sovereignty not seen in those countries since many were under the jackboot of the Third Reich 70 years ago.

For be in no doubt what fiscal union means: it is one economic policy, one taxation system, one social security system, one debt, one economy, one finance minister. And all of the above would be German.

Conclusion

Right now, the EU is a terribly undemocratic institution.  Individual voters have next to no power over the control freaks that run things in Brussels.  Every single day, the EU becomes a little bit more like the former USSR.

The last thing that the people of Europe need to do is to give the EU more power but that is exactly what the elite of Europe want. They want a “United States of Europe” and they may just be willing to allow a massive financial crisis to happen in order to get it.

*http://endoftheamericandream.com/archives/they-want-a-united-states-of-europe-but-they-are-going-to-need-a-massive-financial-crisis-in-order-to-get-it

Regardless of what certain pundits and investors say, I believe gold will have a great run into the end of 2011. [Why?] Because I think a currency crisis is brewing worldwide, and gold will be a safe place to store value. The Euro and USD are fundamentally weak, and inflation is nearly out of control due to huge stimulus packages and low interest rates that aren’t helping struggling economies. Gold should be the crutch to lean on for a while. [Let me expand on the aforementioned reasons.] Words: 675

So says Eric Kelly (www.hedgefundlive.com)  in edited excerpts from an article* which Lorimer Wilson, editor of www.munKNEE.com (It’s all about Money!), has further edited ([  ]), abridged (…) and reformatted below  for the sake of clarity and brevity to ensure a fast and easy read. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement. Kelly goes on to say:

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[As I said at the beginning of the article]…I think a currency crisis is brewing worldwide, and gold will be a safe place to store value. The Euro and USD are fundamentally weak, and inflation is nearly out of control due to huge stimulus packages and low interest rates that aren’t helping struggling economies. Gold should be the crutch to lean on for a while.

*http://seekingalpha.com/article/278946-gold-will-keep-cruising-as-currencies-come-under-pressure?source=email_macro_view

Related Articles:

1. Don’t Dismay: 6 Reasons to Hold Your Gold Through The Summer  http://www.munknee.com/2011/07/dont-dismay-6-reasons-to-keep-holding-your-gold-through-the-summer/
2. July Breach of Gold’s 150-Day MA Would Suggest 22% Rise by Year End   http://www.munknee.com/2011/07/july-breach-of-golds-150-day-ma-would-suggest-22-rise-by-year-end/
3. Gold’s Recent Price Action Suggests Ultimate Top of $5,000/ozt.  http://www.munknee.com/2011/06/golds-recent-price-action-suggests-ultimate-top-of-5000ozt/
4. Gold to Repeat?  http://www.munknee.com/2011/07/gold-to-repeat/

Editor’s Note:

• The above article consists of reformatted edited excerpts from the original for the sake of brevity, clarity and to ensure a fast and easy read. The author’s views and conclusions are unaltered.
• Permission to reprint in whole or in part is gladly granted, provided full credit is given as per paragraph 2 above.

Gold

Five Trades to Make Before the Euro Implodes 

Greece is going to default and even take the euro, and maybe the EU, with it. There will be 5 investment opportunities should that unfold as expected and one of them will be the U.S. dollar. [Let me explain.] Words: 1187

So says a commentary* from the staff of www.thedailybell.com on an article by Marketwatch’s Matthew Lynn which Lorimer Wilson, editor of munKNEE.com  (Your Key to Making Money!), has further edited ([  ]), abridged (…) and reformatted below  for the sake of clarity and brevity to ensure a fast and easy read. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.  The article goes on to say:

Lynn contends in his article that:

You don’t exactly need a crystal ball to know what the biggest event in the financial markets of the next 12 months is going to be: Greece defaulting on its debts. This week Standard & Poor’s cut its rating on the country to CCC, the lowest of any nation in the world. Only last week we learned that Greek industrial production was down 11% year-on-year. Unemployment has risen 40% over the past year, and now stands above 16% nationally. The debt is too high and the deficit is too deep. Greece will default and every one knows it – even though no one will say it!  The question is simply one of time and amount.

With this in mind, Lynn provides us with five trades based on the unraveling of the euro that he believes are positive:

1. German bunds: Buy them and sell the DAX stock index. The deutsche mark that will arise from the ruins of the euro will be a dominant currency. This means German bonds will rise in value as the currency appreciates; at the same, Lynn believes Germany’s exports may not have such a good time of it, at least not at first. Eventually German manufacturers will once more figure out how to do business with a strong currency as they did throughout much of the 20th century but the learning curve will offer pain. Why participate? Sit on the sidelines.
2. The Swiss franc: Sell it. Investors are buying the franc right now, and even the Israel shekel, desperate for a safe haven. What IS safe right now? The dollar? The yuan? The Japanese yen? Most countries are struggling these days one way or another, but if the euro evaporates, several currencies will likely emerge that might definitively claim safe-haven status. The deutsche mark, Lynn writes, will certainly draw money away from the Swiss franc, which will then depreciate.
3. The Belgium index: Another sell. This is an obvious one for Lynn. Brussels, a tiny little pimple of a country, has been in the right place at the right time. The euro and the EU have puffed it up, and today somehow it presides over a super-state the size of America. Maybe not for long. Brussels is chock full of lobbyists, politicians and diplomats, all buying expensive meals and renting luxurious flats. That will change if the euro withers and the EU collapses. The economy shall surely deflate and many Belgium companies along with the stock index.
4. European travel companies: Buy them. A problem with the strong euro is that it has virtually eviscerated the travel business to Southern Europe – one of the reasons the PIGS are having so much trouble economically – but once the pesky euro goes away, the normal balance of Europe will reassert itself. Northern Europeans will continue to enrich themselves and then, in the summer, travel south to Spain, Italy or Greece to relax. The local travel industry will re-establish itself. Even the Greeks will prosper.
5. The US dollar. Buy. (Imagine that!)  Lynn believes the PIGS debt, dumped by German and French banks, has ended up in US hands. Thus, [while] the U.S. economy will take a hit, the dollar as a currency will appreciate. There is no alternative. The dollar, he writes, will be the recipient of a second wind and spend at least another decade as the world’s reserve currency.

Our Comments on Lynn’s Expectations/Recommendations

The above suggestions are logical trading strategies, clearly laid out. Our only disagreement might be with the initial assumption. We’re not convinced the euro is going away, nor the EU, at least not any time soon. We would like to think so, but we’ll settle for a hampered euro and a humbled EU that cannot do so much damage to people’s civil liberties as its handlers would prefer.

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The initial idea of the EU as a free trading zone might be seen as a good one. The current monstrosity is a vicious mess that aspires to be an empire, though it’s crumbling now. This is one trend worth encouraging.

Sure, Greece may drop out of the euro, even Spain and Portugal. The eurozone might simply default toward the North – Germany and the Scandinavian countries. If there is to be a euro, the northern industrial engine will run on it. They can form a formidable currency block if they wish to.

Lynn’s remarks about selling the Swiss Franc seem feasible to us, if we accept the euro lingers on in the North. If so, Brussels won’t entirely shrivel away. Too bad.

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We are not sure we agree about buying the dollar. The U.S. is in terrible trouble financially; we might be tempted to make it an honorary PIG. The U.S. has been under attack by the power elite for over a century and we have trouble believing that attack will diminish any time soon. They regard the libertarian and republican sentiments of the U.S. with enimnity; they are trying to crush the culture and the economy and these attacks will no doubt continue.

Even a shrunken EU and euro would be an enormous victory and a defeat for the powers-that-be who are trying to use the EU as a stepping stone to a kind of one world order. The most poisonous ambitions of the Anglosphere elite would be lanced. Defeat is a terrific prophylactic.

There would be knock-off effects as well. The currency unions that the Western elites have been so assiduously encouraged in South America, Asia, Africa and even the Middle East would likely become less attractive given the euro’s implosion. All to the good.

Concusion

There will surely be numerous trades to contemplate as the euro situation evolves. Who knows, they may even hold it all together. We hope not. We would much rather bet against this evolving authoritarian empire than for it.

*http://www.thedailybell.com/2501/Ways-to-Invest-as-Faith-in-Fiat-Money-Withers.html

Editor’s Note:

• The above article consists of reformatted edited excerpts from the original for the sake of brevity, clarity and to ensure a fast and easy read. The author’s views and conclusions are unaltered.
• Permission to reprint in whole or in part is gladly granted, provided full credit is given as per paragraph 2 above.
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