US Fed Bails Out Europe

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FAlley's picture
FAlley
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US Fed Bails Out Europe

Seems the Federal reserve is printing money to loan to the European Central Bank.

http://news.blogs.cnn.com/2011/11/30/velshi-banks-move-a-coordinated-effort-to-help-europe-buy-time/?hpt=hp_t2

http://news.blogs.cnn.com/2011/11/30/quest-banks-move-helps-but-doesnt-address-fundamental-eurozone-problems/?hpt=hp_t2

This is fairly significant, no? What's anyone's take on it?
I see no discussion on it yet so I thought we'd get it going.

No_Fiat's picture
No_Fiat
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 It is a stupendous act of

 It is a stupendous act of inflationary policy.

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SagerXX
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Depending on...

...who you believe, this action implies some major US bank was about to have its Lehman moment (BAC?), some major Euro bank was about to go belly-up ( SocGen?), or the entire EU system was about to freeze up due to a lack of liquidity. And again, depending on who's opining, this action will either delay the inevitable until next Summer, or March '12 (long enough to get QE3 cleared for takeoff?), or 48 hours. Give or take. Tha fact that the equity markets are partying it up today seems to imply they don't understand that the actual ISSUES in question have not been addressed. Viva -- Sager

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Damnthematrix
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The race is on.......

The race to the bottom is on.....!  Global hyperinflation here we come.

Just as we all remember Dec 6 1942, we will remember Dec 1 2011.  The can just got kicked a little further down the road.... trouble is the road leads to a cliff with lots of sharp rocks at the bottom.

Mike

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Jim H
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Thanks for starting the thread Foster...

this is big.  A few comments that I found insightful;

http://www.zerohedge.com/news/ron-paul-statement-feds-bailout-europe

http://jessescrossroadscafe.blogspot.com/2011/11/fed-enlarges-conduits-t...

From Jesses piece above;

I wrote about this just yesterday.   I could not ask for a better straight man than Ben Bernanke.

"I think the major monetization is already occurring in the Eurodollar markets, and an ongoing stealth bailout of European debt, in order to save the big money center banks at home and broaden the reach of the Dollar.

And this is why the Fed stopped reporting on Eurodollars some years ago, as a component of M3. It was to pave the way for the monetary equivalent of a financial neo-con, to addict European governance to the US dollar and pave the way for a stronger position for the dollar as a one world currency."

and the piece continues;

"This action, led by the US Fed, has had a marked effect on commodity prices in dollars. So the beneficiaries, or at least those protecting their wealth, are those holding precious metals and positions in dollar sensitive commodities.

Although the Fed will say that there is no potential loss in this to US taxpayers, in fact there is ALWAYS a loss to be realized at some point in the deliberate mispricing of risk.  This loss will be taken by all holders of US dollars.

This is not QE3 and does little to help the US economy

per se

.  This is just a big serving of a quick energy drink to ease the short term liquidity problem in Eurodollars. It is also timed to dull the news impact of the bank downgrades.

When the sugar rush wears off, and it will because this is does little to help the average person in the real economy, we will see how the markets react to the ever growing piles of paper dollars covering the landscape of a mismanaged and ruined economy.

But it was extraordinarily kind of the Fed to announce this just in time for the banks and the hedge funds to repair some of the damage from the stock market decline before they close their trading books on November.

The Eurozone problems have not been solved by this. The US domestic economy has not been improved by this, except to weaken the dollar and increase commodity prices."

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docmims
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i am glad the can got kicked

i am glad the can got kicked down the road.  I really like my air conditioning and would like to keep it for a couple more summers.  I have a water well scheduled to be put in and some pecan and fruit trees to plant this winter.  The longer they can stall a collapse -- the longer I have to prepare.  You can never be fully prepared.  Just don't be deluded that anything is being fixed.  This 500 point rise in the DOW today could be the final blowout before a precipitous fall.
 

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Damnthematrix
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Risk On ? Surely it should be Risk Off !

Zerohedge has a piece about the latest bail-out manoeuvre being leaked on Monday, hence the "risk on" rally in markets which nobody at the ABC was able to explain.
http://www.zerohedge.com/news/did-fed-leak-european-bailout-decision-monday-morning-visual-exhibit
It is more incomprehensible than usual.

Another way to visualise this is with the Safe Haven index. The index goes up when there is "risk off"  sentiment, and goes down with "risk on".

The index was at 211.7 over the weekend (100 = 8 April 2010) and fell to 201.8 on Monday close in NY and fell to 194.1 yesterday. Definitely risk on.

But at the same time Gold went up 2.1%  yesterday almost all of that was in the first half an hour when the statement was made, which is definitely risk off.

How can it be both at the same time ? Because it is insane to think that printing more fiat money will cure a debt crisis - it will only postpone it and require even more printing soon. And more and more as time goes on. Nevertheless money poured out of US Bonds and into risk assets (shares)
and into the ultimate inflation-proof safe haven of gold.

I was glad to see that Australia was the only one of the seven global currencies that didn't take part. Not surprisingly though, the AUD rose sharply against "all currencies" - well at least the other six. 96.9 US cents to 102.4 in a week.

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Damnthematrix
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i am glad the can got kicked
docmims wrote:

i am glad the can got kicked down the road.  I really like my air conditioning and would like to keep it for a couple more summers.  I have a water well scheduled to be put in and some pecan and fruit trees to plant this winter.  The longer they can stall a collapse -- the longer I have to prepare.  You can never be fully prepared.  Just don't be deluded that anything is being fixed.  This 500 point rise in the DOW today could be the final blowout before a precipitous fall.
 

You mean that cliff you're gonna drive your truck over?  The one with all the jagged rocks at the bottom.....?

How long does a credit card last when you make your mortgage payments off it...?

Damnthematrix's picture
Damnthematrix
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Ron Paul Statement On The Fed's Bailout Of Europe

Ron Paul Statement On The Fed's Bailout Of Europe

Tyler Durden's picture

From Ron Paul

Statement on the Fed's Continued Euro Bailout

The Fed's latest actions in cooperating with foreign central banks to undertake liquidity swaps of dollars for foreign currencies is another reason why Congress needs enhanced power to oversee and audit the Fed.  Under current law Congress cannot examine these types of agreements.  Those who would argue that auditing the Fed or these agreements with central banks harms the Fed's independence should reevaluate the Fed's supposed independence when the Fed bails out Europe so soon after President Obama promised US assistance in resolving the Euro crisis.

Rather than calming markets, these arrangements should indicate just how frightened governments around the world are about the European financial crisis.  Central banks are grasping at straws, hoping that flooding the world with money created out of thin air will somehow resolve a crisis caused by uncontrolled government spending and irresponsible debt issuance.  Congress should not permit this type of open-ended commitment on the part of the Fed, a commitment which could easily run into the trillions of dollars.  These dollar swaps are purely inflationary and will harm American consumers as much as any form of quantitative easing. 

The Fed is behaving much as it did during the 2008 financial crisis, only this time instead of bailing out politically well-connected too-big-to-fail firms it is bailing out profligate government spending. Citizens the world over deserve better than this. They deserve sound money that cannot be manipulated and created out of thin air by central planners who promise printed prosperity. Fiat money caused this European crisis and the financial crisis before it.  More fiat money is not the cure. The global fiat currency system has proven itself a failure, we need real monetary reform. We need sound money.

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Pretty Amazing

It is pretty amazing.  The central banks did not do this because they got bored looking at dirty magazines.  They did it because they thought they had to or there was going to be a major problem.  They did this a while back and a couple of years later we find out from the Bloomberg LLP freedom of information act suit that an aircraft carrier of money was invented and handed out through a number of different avenues.  The entire time this was going on everyone involved lied about it.  I am sure there are a lot of lies right now.

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Johnny Oxygen
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Re: Pretty Amazing

Dshields.

I think you are refering to this which I posted a while back.

 

BernankeLeaks, Fed and Wall Street Banks $12.3 Trillion Biggest Scam in World History

http://www.marketoracle.co.uk/Article24837.html

Just when I thought the banksters couldn’t possibly shock me anymore… they did.

We were finally granted the honor and privilege of finding out the specifics, a limited one-time Federal Reserve view, of a secret taxpayer funded “backdoor bailout” by a small group of unelected bankers. This data release reveals “emergency lending programs” that doled out $12.3 TRILLION in taxpayer money - $3.3 trillion in liquidity, $9 trillion in “other financial arrangements.”

Wait, what? Did you say $12.3 TRILLION tax dollars were thrown around in secrecy by unelected bankers… and Congress didn’t know any of the details?

Yes. The Founding Fathers are rolling over in their graves. The original copy of the Constitution spontaneously burst into flames. The ghost of Tom Paine went running, stark raving mad screaming through the halls of Congress.

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shanus
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They aren't prinitng money

I wonder how many investors mistook a currency swap for prining money and asissted the drive up in the markets yesterday..

I suggest looking at this video to see what usually happens after currency swaps, its a harbinger of doom.. I still can't beleive the markets went up as much in repsonse...

http://video.ft.com/

Johnny Oxygen's picture
Johnny Oxygen
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shanus wrote: I wonder how
shanus wrote:

I wonder how many investors mistook a currency swap for prining money and asissted the drive up in the markets yesterday..

I suggest looking at this video to see what usually happens after currency swaps, its a harbinger of doom.. I still can't beleive the markets went up as much in repsonse...

http://video.ft.com/

 

Hi Shanus

Welcome to CM.

 

docmims's picture
docmims
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Damnthematrix wrote: docmims
Damnthematrix wrote:
docmims wrote:

 

You mean that cliff you're gonna drive your truck over?  The one with all the jagged rocks at the bottom.....?

How long does a credit card last when you make your mortgage payments off it...?

It is quite easy to pay off the credit card when the dollars are worthless. 

I am just amused by the posters who seem disappointed that the economy didn't collapse and the fed kicked the can for a few months.  Those few months can be a life saver for some foresightful folks.

I have a still and my truck is E85 btw.

FAlley's picture
FAlley
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Damnthematrix

Damnthematrix wrote:

"I am just amused by the posters who seem disappointed that the economy didn't collapse and the fed kicked the can for a few months.  Those few months can be a life saver for some foresightful folks."

 

I have to admit, I was initially disappointed that 'the can got kicked down the road' when I first heard this. It's easy to fall in with the survivalist crowd and want to see things get miserable so you can say "Told ya so." Thanks for posting a reminder of where sanity lies- in having more time to gather before the winter.

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