Financial Armageddon was only hours away

May 10 2010 – Nearly another collapse of financial System

Yet another crash in the financial system was delayed only by the decisive action of European politicians and European central banks. With the decision to print money at an accelerated speed, they tried to at least close the leaks in European and especially French banks.

The French banking system was on the brink of collapse by Sunday night and only the decisive action saved the banks and French state from collapse.

We already noticed the concerted action against France in the CDS market quite some weeks ago. Last weekend France became illiquid. This was a logical reaction to the silly idea that Governments and states would be able to manage financial markets. The opposite is the case. States have to borrow from these markets, but not to tell them what to do.

The last attempt to rescue Greece diverted the attraction of Speculators onto the Euro-zone as a whole. Short positions on the Euro threatened a capital flight from governmental and private securities. There was no other way to act as the promise of printing money at faster rate than it was withdrawn from European capital markets. (I outlined the deflation long time ago as one of the most critical factors to look at)

With the decision to print money, the Eurozone has engaged in a last stand poker game bluff. Nobody really believes it, but at least the banks are saved for the moment of time. How long this moment will last depends on the fact if speculators now will focus their energy on Britain as the next potential victim, before they again attack Europe.

Today’s news that the rating agencies will revalue the ratings for Portugal and other European member states show that they will eventually will do both at the same time.

There is no way out, only a new currency.

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