Colin Peterson

Gary North writes about Europe: 

The euro faces the problem that every cartel faces: cheating by its members. In a cartel of goods, members secretly sell below the agreed-upon price.  In a monetary cartel, members cheat fiscally. They run up the bill, then threaten to default if the other members do not fork over the money. This is Europe's problem today. The cartel is breaking apart.

The key to any cartel is its ability to impose painful sanctions on cheaters.  It is now clear that the European Union has no negative sanctions that are taken seriously by member nations. The voters in each nation can inflict negative sanctions on politicians who impose austerity programs, such as higher taxes or cuts in spending. Politicians  fear voters more than they fear the EU.

Karl Denninger is wrong again. He should turn off his caps lock and think a bit harder about the desperation move that is the German government's ban of various free-market transactions like short selling and credit default swaps.

Credit default swaps (CDS) are a good idea that make it easier for bonds to find the right market prices. The cash bond market is illiquid and CDS are an innovation that makes pricing information enter the market more easily.

All these arguments about CDS buyers "burning down their neighbor's house" where they don't have an insurable interest are hogwash. Notice all the complaints about CDS come from entities that have an interest in bonds NOT finding market prices. Notice you never hear Norway complaining about hedge funds buying Norwegian CDS.