> Are there XRP IOUs at all?
nope

> Why do you think, say USD IOU issued by gateway A will always be in par with USD IOU issued by gateway B?
They might not be. there can easily be an exchange rate between them in the distributed exchange.

>I think if he gives you a 10 EUR bill in meatspace, you use the ripple system to send him 10 ripple-Euros. From his and your point of view, everything is settled.
yep


>So how does the system protect against credit default swap shenanigans?
What are you exactly worried about? I have a feeling it isn't credit default swaps since that is a complicated financial instrument that doesn't really apply to ripple.