Those "New" E.U. Fiscal Rules Aren't
So New

Shah Gilani

Very soon we will see if the old market adage "Buy the rumor, sell the news" is true.

While rumors of Europe's impending demise were momentarily shot down by an array of silver bullets, the actual news out of Brussels of a grand bargain wasn't… exactly… honest.

Let's call the half-measures agreed to by European leaders "Brussels sprouts," because they're more like "green shoots" than a cabbage patch panacea.

The leaders agreed to agree that they needed an agreement on how to more closely integrate their fiscal and monetary interests.

Yeah, that's what they said. I say good luck with that.

Actually, they made some other moves, too.

They moved up the date for the European Stability Mechanism to get funded (yeah, right), and promised to revisit the European Financial Stability Facility's financing so they could have twin facility spigots.

And – this one's my personal favorite – they winked at having European central banks make bilateral loans up to $264 billion (€200 billion) to the International Monetary Fund so the IMF could back Europe's central banks and the European Central Bank.

You just can't make this stuff up.

Seriously, there's nothing like a crisis to consolidate your power – which is what the Northern Europeans are angling for.

But for the life of me, I can't imagine a bunch of sovereign nations subjecting themselves to forced austerity, being taxed by technocrats (who, of course, will be non-partisan, non-xenophobic, nonplussed objectivists), and dictated to as occupied territories by the machinery that ground them down in the first place… and wants to keep them there.

What… You don't get that?

Here's a newsflash for you: The "new" rules about maintaining strict debt to GDP ratios and other my-way-or-the-highway fiscal demands are not new at all.

The same metrics for fiscal discipline that were lauded last week were already in place – it's just that no one followed them.

Everybody cheated… starting with the Germans themselves.

See, the whole idea of a "common currency" was a ploy by the Germans and their French followers to facilitate cheap financing across Europe so European politicians, especially the profligate PIIGS, could float ever-larger deficits to give ever-wanting constituents buying power to, guess what, buy exports from the Northern Alliance.

And it worked.

Now, with no place to go but debtor's prison (whose chief warden is the IMF), the PIIGS and others who lapped up cheap euro financing schemes won't be able to devalue themselves to make themselves more competitive.

So, while they are being told to tighten their belts and being taxed into no-growth (which will then demand "stimulus" measures), the Northern Alliance plans on enjoying a more competitive position in global markets by the pending devaluation of the euro. That will come about when the ECB eventually capitulates to likely quantitative easing schemes.

It's one thing for the leaders of Europe to try and lead the Union out of its crisis, but it's quite another for the people of Europe to capitulate to some foreign fiscal power. The Brits already said take a hike, and three of the remaining 26 nations that are supposed to be agreeing can't agree to anything until their parliaments vote on whether they agree.

Ah, there's the rub… Agree on what?

Shah Gilani

About the Author

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Shah Gilani is Chief Financial Strategist for Money Map Press and boasts a financial pedigree unlike any other. He ran his first hedge fund in 1982 from his seat on the floor of the Chicago Board Options Exchange. When options on the Standard & Poor's 100 began trading on March 11, 1983, Shah worked in "the pit" as a market maker. The work he did laid the foundation for what would later become the Volatility Index (VIX) - to this day one of the most widely used indicators worldwide. After leaving Chicago to run the futures and options division of the British banking giant Lloyd's TSB, Shah moved up to Roosevelt & Cross Inc., an old-line New York boutique firm. There he originated and ran a packaged fixed-income trading desk and established that company's "listed" and OTC trading desks. Shah founded a second hedge fund in 1999, which he ran until 2003. Shah's vast network of contacts includes the biggest players on Wall Street and in international finance. These contacts give him the real story - when others only get what the investment banks want them to see. On top of the free newsletter, as editor of The 10X Trader, Money Map Report and Straight Line Profits, Shah presents his legion of subscribers with the chance to earn ten times their money on trade after trade using a little-known strategy. Shah is a frequent guest on CNBC, Forbes, and MarketWatch, and you can catch him every week on FOX Business' "Varney & Co."

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