Federal Reserve opens credit line to Europe

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DrKrbyLuv's picture
DrKrbyLuv
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Federal Reserve opens credit line to Europe

WASHINGTON AP — The Federal Reserve late Sunday opened a program to ship U.S. dollars to Europe in a move to head off a broader financial crisis on the continent.

Other central banks, including the Bank of Canada, the Bank of England, the European Central Bank and the Swiss National Bank, are also involved in the effort.

The action reopens a program put in place during the 2008 global financial crisis under which dollars are shipped overseas through the foreign central banks. In turn, these central banks can lend the dollars out to banks in their home countries that are in need of dollar funding to prevent the European crisis from spreading further.

First of all, the Federal Reserve does not back up any of the money they create as international loans.  They monetize the debt of others and "We the People" back them up with our currency - by the good faith and credit of the United States.  We are effectively "co-signers" on the debt that they issue even though we have no say on where the money goes and how it will be used.  When they extend credit it is not theirs, it is ours as we ultimately secure it. 

Ask yourself this question...if the ECB (European Central Bank) is able to create money, why do they need to borrow from the Fed?  In fact, every smaller, national franchise (e.g. Bank of England, Bank of Germany) European central bank (they will not be needed much longer) may create money.  Why would they borrow money, at interest, that they can create for free?

The answer is that they are simply looking for third party collateral - us.  If the loans go under, our assets and future wages will back them.

The bigger question is this...the Federal Reserve is owned operated by the same bankers who happen to own and operate the ECB, IMF, BIS, BoE, etc., and all of their franchise states are going bankrupt (Greece, U.S., U.K., Spain, etc.) why do we need or want them?  Why don't we simply create the money ourselves as individual sovereign nations and cut them out as the unnecessary parasites that they are?

It also had begun to lay out a plan to reel in the unprecedented stimulus money pumped out during the crisis. The Fed's balance sheet ballooned to $2.3 trillion, more than double where it stood before the crisis struck. The program reopened on Sunday will expand the Fed's balance sheet, economists say. However, the program poses little credit risk to the Fed because the arrangements are with other central banks, they added. 

Of course there is little risk for the Fed as they collect interest if the debt is repaid and collateral if it isn't.  The collateral route is best for them because they get seize assets from both the primary (European franchise nations) and secondary (We the People) sources. 

Has anyone in Washington mentioned that we are already going bankrupt and cannot afford lending to foreign nations that are as insolvent as us?  Not likely, that would take a representative form of government.

Larry

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lerikson
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Re: Federal Reserve opens credit line to Europe

The Fed is now serving as the Fannie Mae for the world and this is in effect a sovereign "liar loan" to the ECB IMO.  I don't think this will end well.

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Erik T.
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Re: Federal Reserve opens credit line to Europe

I think this is very, very bad.

The path we were on was basically the U.S. is eventually going to melt down thanks to Bernankenomics. The US is too big to be "bailed out" by the Europeans, but there was reason to think maybe Europe would be recovered enough that displaced Americans could rely to some extent on connections with Europeans, those who have family there might emigrate back if things get really ugly in the US, etc.

But now we are moving to Bernankenomics across the entire west. Guess what? The asians aren't going to bail out America. They would love to see the west disintegrate.

It's worse than exporting inflation. Now we're exporting reckless monetary policy.

The problem is, this doesn't end with a western hemisphere economic depression. It ends with a world war, and that scares the crap out of me.

Erik

 

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Erik T.
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Re: Federal Reserve opens credit line to Europe
DrKrbyLuv wrote:

Ask yourself this question...if the ECB (European Central Bank) is able to create money, why do they need to borrow from the Fed?  In fact, every smaller, national franchise (e.g. Bank of England, Bank of Germany) European central bank (they will not be needed much longer) may create money.  Why would they borrow money, at interest, that they can create for free?

My guess is this deal was initiated by the Fed and involves a side deal that stipulates how some of the swapped funds will be used. Akin to the scam Chris exposed a year ago where they were using swap lines to manipulate the DX.

Erik

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Re: Federal Reserve opens credit line to Europe
Erik T. wrote:
DrKrbyLuv wrote:

Ask yourself this question...if the ECB (European Central Bank) is able to create money, why do they need to borrow from the Fed?  In fact, every smaller, national franchise (e.g. Bank of England, Bank of Germany) European central bank (they will not be needed much longer) may create money.  Why would they borrow money, at interest, that they can create for free?

My guess is this deal was initiated by the Fed and involves a side deal that stipulates how some of the swapped funds will be used. Akin to the scam Chris exposed a year ago where they were using swap lines to manipulate the DX.

Erik

World reserve currency.

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Re: Federal Reserve opens credit line to Europe
Erik T. wrote:

I think this is very, very bad.

The path we were on was basically the U.S. is eventually going to melt down thanks to Bernankenomics. 

+1 sooner than later.

Erik T. wrote:

The problem is, this doesn't end with a western hemisphere economic depression. It ends with a world war, and that scares the crap out of me.

+1, even if we get through the depression barring some fantastic energy related fix/invention - once these morons wake up to the fact oil is in decline they will obliterate any and all competition.

The only unknown: Who "they" will be. Who will wake up first, China, Russia or the morons in DC?

 

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Re: Federal Reserve opens credit line to Europe

Just last Thursday, Ron Paul argued that his Fed audit bill is needed to find out details of the enormous currency swaps the Fed introduced a couple of years ago.

Nice timing, Ron. Because here we go again.

The Constitution says that funds shall not be appropriated without an act of Congress. The subterfuge that the Fed is nongovernmental will not do. Usgov appoints its board, takes its excess profits, and uses it as an agent of the Treasury and of public policy.

It is unacceptable for the Federal Reserve to continue evading scrutiny. The renewed swap lines, opened with NO Congressional debate or authorization, should be subjected to immediate audit and public disclosure.

Smash the Fed's secrecy!

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DrKrbyLuv
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Re: Federal Reserve opens credit line to Europe

The Latest US Taxpayer Bill To Save Europe, And Specifically The French Banks: $57 Billion

The latest (and certainly not last) IMF portion of the European bail out is E220 billion, or $287 billion at today's exchange rate. As the US and its taxpayers represent roughly 20% of total IMF funding, today's 3% loss in dollar purchasing power to the middle class will cost the middle class $57 billion. Paying for the privilege of being able to purchase less sure sounds like a squid-pro-quo type of deal for us here.

Politicians everywhere applaud this most recent rape of America's working class, even as communism is now the global ideology. Who needs TheOnion.com when reality is now 10 times more surreal. And the direct recipients of taxpayer generosity: SocGen, AXA, Dexia, CA and all other French and German banks, which right now are all up ~20%.

And we may be bailing out more than just European banks...

(Bloomberg)   JPMorgan Has Biggest Exposure to Debt Risks in Europe

JPMorgan Chase & Co., the second- biggest U.S. bank by assets, has a larger exposure than any of its peers to Portugal, Italy, Ireland, Greece and Spain, according to Wells Fargo & Co.

JPMorgan’s exposure to the five so-called PIIGS countries is $36.3 billion, equating to 28 percent of the firm’s Tier-1 capital, a measure of financial strength, Wells Fargo analysts including Matthew Burnell wrote today. Morgan Stanley holds $32.4 billion of debt in the region, which equates to 69 percent of its Tier 1 capital, Burnell wrote.

U.S. banks held a total of $236.8 billion of exposure to the five nations, including $18.1 billion to Greece, Wells Fargo said. European banks have claims totaling $193.1 billion on Greece, according to the Bank for International Settlements, with another $832.2 billion of claims on Spain.

We here at CM (CC graduates) recognize the insatiable (exponential) growth of debt that accompanies a debt based money system but have you seen any mention of this mathematical certainty coming from the corporate media?  Fortunately, we have alternative media:   

The Economic Collapse - Right now almost all of the governments in the western world operate debt-based economies that rely on ever-inflating amounts of paper money in order to survive. The elite international bankers of the world have made a killing by creating money out of nothing and loaning it to the nations of the world.

The interest on those loans is the primary method by which the wealth of the world is slowly transferred into the hands of the ultra-wealthy. When the interest on the loans starts to become too much for a particular nation, they borrow even more money so that they can stay afloat. It is a debt trap that is designed to continue indefinitely. Even the most powerful nations in the world are caught in this debt trap. In fact, most people are absolutely amazed when they learn that it is mathematically impossible to pay off the national debt of the United States. But the United States is far from alone in that respect. Almost all of the other major nations in the world are in the exact same boat. 

Federal Reserve Chairman Ben Bernanke is publicly saying that United States citizens will soon have to make difficult choices between higher taxes and reduced social spending....The Federal Reserve Created This Financial Mess And Now They Expect Us To Pay Higher Taxes And Have A Lower Standard Of Living So We Can Pay Interest To Them.

Why all of a sudden do nations all over the world have to implement austerity measures? Why all of a sudden are we all being told that we are going to have to tighten our belts?  

...all of this was planned of course...There is a belief by many that the financial powers of the world are going to create a world economic crisis (the problem) so that when everyone cries out for help (the reaction) they will be there with the solution they wish to propose (perhaps a world currency or increased global governance).

Perhaps the most relevant thing that you can read is posted at this site by our host...Exponential Money in a Finite World

CM suggest that our total money supply is (M3) is just over $14 trillion...total debt over $50 trillion.  How do we repay $50 trillion in debt when we only have $14 trillion in money supply?  Answer...we borrow more...or default...or more likely, we do both.

Answer number 2...we fire the Fed and issue the money ourselves, free from debt.  If the creation of money is so profitable, why shouldn't we harness this opportunity to rid ourselves of taxes while reestablishing our financial sovereignty?   

Larry

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Baywork
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Re: Federal Reserve opens credit line to Europe
Erik T. wrote:

I think this is very, very bad.

... It ends with a world war, and that scares the crap out of me.

Quid pro quo? Yes, it’s very, very bad applied Bernankenomics:
exchange festered private credit with public credit for the rope-team.

Just another snafu bailout for the Goldman Sachs, JP Morgans, Deutsche Bank, French Banks …

Eventually it’ll end the FED, ECB, aso, however a world war is downright not mandatory.

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Re: Federal Reserve opens credit line to Europe

I have a question on currency swaps for anyone who knows about these things.

My belief is that when a country issues a swap, that they increase their own debt to issue new currency, which is then sold or swapped, to buy the other nation's currency. So, for example, the SNB (Swiss National Bank) issues new debt to create new Swiss Francs which are then swapped for Euros, so the end result is the Swiss people are deeper in debt because of the swap. Is this correct? If so, there is an interesting take on this situation....

Your article states: "Other central banks, including the Bank of Canada, the Bank of England, the European Central Bank and the Swiss National Bank, are also involved in the effort.", and as you point out Larry, the same people own all of these banks.

The point being if the ECB issued all this debt on their own, the currency would likely collapse, but by having Canada, England, Switzerland and the USA supporting the Euro, the people of each of these countries is also going deeper in debt. Rather like a socialism of world debt - spread it around and suck the wealth out of countries that have nothing to do with the mess?

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Baywork
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Re: Federal Reserve opens credit line to Europe
John99 wrote:

The point being if the ECB issued all this debt on their own, the currency would likely collapse, but by having Canada, England, Switzerland and the USA supporting the Euro, the people of each of these countries is also going deeper in debt. Rather like a socialism of world debt - spread it around and suck the wealth out of countries that have nothing to do with the mess?

All countries run on fiat money. Each of these countries is naked at the day a major currency collapses. Heliben already went all-in with the taxpayer pot, equally did the Europeans yesterday. Now the pretenders continue to hold cards covered until they'll have to see the showdown.

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V
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Re: Federal Reserve opens credit line to Europe

This is nothing new and goes back hundreds of years. Where do you think the gold that Roosevelt took ended up. It is just business as usual with the names changed to protect the guilty.

V

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docmims
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Re: Federal Reserve opens credit line to Europe

Kirby

I agree with much of what you say except that the US is collateral.  Quite frankly you have to have the strength and ability to repo the collateral.  There is no country out there with the ability to repo us.  Like I told Swamp Mama in another post, if the shit really hits the fan; all it takes to stop forclosure is a good rifle.

Cheers.

 

(It's a joke VF)Wink

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Re: Federal Reserve opens credit line to Europe

 

If the US Federal Government can borrow trillions,   they  will  print as much.

http://en.wikipedia.org/wiki/Hyperinflation

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compinthegroove
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Re: Federal Reserve opens credit line to Europe
Erik T. wrote:

The problem is, this doesn't end with a western hemisphere economic depression. It ends with a world war, and that scares the crap out of me.

Erik

An alternative scenario is a revolution, which I think is equally likely.  It's scary either way.

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