The EU Continues Its Work On Global Governance

Today, September 6, 2010, three months after agreeing on the outlines of a major reform of EU economic governance, finance ministers from twenty-seven countries will discuss more effective sanctions for breach of the Stability And Growth Pact.

On the menu for the working group, chaired by Herman Van Rompuy, will be a study of the arsenal of available sanctions, reflecting on how they should be fired; and vetting of national budget before adoption by national parliaments.

SpainYou reports: “We must ensure that those sanctions can be more automatic, they can be accelerated in order to play a role in the preventive (Stability Pact),” said Luxembourg Prime Minister Jean-Claude Juncker in his arrival in Brussels.

“Mechanism (crisis management) should be discussed in the next few weeks and it might be wiser to defer this matter to a later date (…) This requires, as perceived by some, a change treaty. I do not think we are prepared to amend the treaty, “said Jean-Claude Juncker.

The European Commissioner for Economic and Monetary Olli Rehn echoed the statements of the President of the Eurogroup. He believes that sanctions pact to become “quasi-automatic” and that time does not press for an agreement on anti-crisis ongoing.

“It’s probably better to postpone the debate on the aid mechanism (…) We have a credible mechanism that works and we can give time for reflection,” he said. The European Union agreed in early May on a plan to support the euro 750 billion, consisting of a community fund of 60 billion euros and loan guarantees of 440 billion euros supplemented by a budget of 250 billion euros from the International Monetary Fund.

This plan is intended to assist for a period of three years from any country of the European currency area that would have the need and request it. It will complement existing bilateral loans to Greece for a total of 110 billion euros.

Commentary

From eternity past God ordained, that is ordered and set forth today’s meeting of the European Finance Ministers to work on a greater federal European Union in attempt to resolve common fiscal and monetary issues.

And God selected one individual, the apostle John, to tell of this vision in the Book of Revelation. The gospel, meaning good news, of bible prophecy opens with it’s purpose: to describe “ things which must shortly take place” (Revelation 1:1-3); meaning that once the prophesied things begin to happen, they will all fall like dominoes, falling one upon another.

Revelation 13:1-3 foretells of a beast, that is a monster system of global governance, rising from the sea of humanity, manifesting in ten global regions operating through mankind’s seven institutions.

It is the surges of economic and political waves that give the beast its power. Knowing that greed and fear would govern man’s economic decisions, He prescribed the three perfect elements for generating economic waves: the sovereign debt yield curve, yen carry trade investing, and derivatives trading. During the week ending September 3, 2010, all three were in active operation moving the world’s financial markets.  

In my article The Potential Unwinding Of Yen Carry Trades And A Flattening Yield Curve, Threatens The Jobs Report Rally I relate bible prophecy being fulfilled: Currency traders rallied the major currencies, DBV, a stunning 6.0%, for the week ending September 3, 2010; taking them back to the middle of a broadening top pattern going back to October 2009. And they rallied the developing currencies, CEW, 1.1%, taking them back to the middle of a broadening pattern going back to November 2009. Thus  the currency traders reset both currencies and stocks for falling.

The currency traders action gave birth to a rally in those stocks that had been sold off heavily since April 26, 2010: the bloating currencies “rallied the dogs”, that is the most risky and shaky of stocks and ETFs.

The ratio of major currencies, relative to developing market currencies. DBV:CEW, rose a breathtaking 6.1% today. In just one day, the ratio of major currencies relative to developing currencies, was brought back to its pre European Sovereign Debt Crisis level. The chart shows today’s action “burst the ratio up” from a head and shoulders pattern and “took the ratio up and out” of a consolidation triangle.

The South African Rand, SCR, rose 1.6%; the New Zealand Dollar, BNZ, 1.5%; the Canadian Dollar, FXC; the Mexico Peso, FXM, 0.9%; it is rolling over, the Swedish Krona, FXS, 1.8%, it rose to the middle of a broadening top pattern going back to mid July 2009, all I can say is lookout below both for the Krona and the Sweden shares, EWD;  the Australian Dollar, FXA, 2.0%, to make for a triple high in this currency; the Brazilian Real, BZF, 1.3% manifesting three white soldiers to a new all time high; the Euro, FXE, 1.3%; the Ruble, XRU, traded unchanged on a ledge of support just above 32, there is nothing but thin air below; the British Pound Sterling, FXB, has dribbled lower to trade above a ledge of support at 153; the Indian Rupe, ICN, 1.3%; Swiss Franc, FXF, 1.2%. The Japanese Yen, FXY,  rose 1.1% to close at 117.28, it has risen from 105 since March of this year, its rise is the anti-thesis of investing long; its rise as shown in the monthly chart, has caused a terrific unwinding of yen carry trade investing in stocks, VT, and commodities, DBC.

And now a flattening yield curve, seen in the ETF, FLAT, will act to destroy bonds, whether they sovereign debt, corporate debt, or municipal debt.  Yes, debt deflation, commenced April 26, 2010 in stocks, and September 1, 2010 in bonds. In just three days, Zeroes, ZROS, fell 8.0%, US Government Bonds TLT, fell 4.5%, and the US Treasury Note, IEF, fell 2% as seen in Yahoo Finance chart …. ZROZ, TLT, IEF

The action of the currency traders in calling the major currencies higher has reloaded and restrengthened the ability of yen carry trade investing to unleash a severe bout of yen carry trade disinvestment.

And the sharp sell off in US Government bonds portends the systemic risk of sovereign debt default by the United States coming from a failed Treasury auction, which would send bonds of all types lower, stop the funding of social program, as well as eliminate the funding of the mortgage GSEs, and create a liquidity evaporation where the Government would have to step in and be the sole provider of money, banking, credit and lending.      

World stocks, ACWI, rose 3.7% for the week; taking them up, but below support of early November 2009. Emerging market stocks, EEM, rose 3.8% for the week; taking them back to them back to the middle of a broadening top pattern going back to January 2010. The emerging market stocks relative to the world stocks, EEM:ACWI, shows the emerging markets to have better relative value to than the world stocks.

Yet the overall worth of stocks, as seen in this relationship has fallen following the peaking out of the 30-10 Yield Curve, $TYX:$TNX, on August 11, 2010 which came as a result of the Federal Reserve Chairmans announcement of August 10, 2010 of the purchase of mortgage-backed securities.

Then on August 27, 2010, the Federal Reserve Chairman stated the possibility of an even larger purchase of debt. This caused the bond rally in US Treasuries,  that began April 6, 2010, to fail September 1, 2010, sending bond prices lower and interest rates higher.

The safe haven rally in debt that began with the onset of the European Sovereign Debt Crisis is over.  Investors see Mr Bernanke’s plans as monetization of debt; and have gone short US Treasuries, especially the longer out ones such as the Zeroes, ZROZ; the chart of the Zeroes, shows three black crows, resulting in waterfall loss of value. 

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