Federal Reserve opens credit line to Europe

[cory777]

Source: AP

WASHINGTON – 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.

The Fed said action is being taken "in response to the reemergence of strains in U.S. dollar short-term funding markets in Europe."

Read more: http://news.yahoo.com/s/ap/20100510/ap_on_bi_ge/us_europe_financial_crisis_fed

[tomm2thumbs]

1. oh goodie goodie, audit the Fed - nothing!

baskets of money thrown out to the world at large

'here ya go, have another... we got plenty of ink'

I love the freshly printed kind - they are so crisp & flat

[Poll_Blind]

2. Aren't we just laundering Chinese financial aid at this point? n/t

PB

[wroberts189]

39. Good point.. no pun intended. nt

[Demeter]

64. Not exactly

The Chinese don't exactly give it away. We have to pay the interest on all this largess, and most likely, the principal, too.

[Unvanguard]

69. This is the Fed. It's not deficit spending. n/t

[DJ13]

3. A year from now.......

"We have spent too much, our deficits are too high, so you poor people and Social Security recipients will just have to do with less...."

You know its coming.

[99 Percent Sure]

23. It's already been said to the millions of jobless who have run out

of UI benefits.

[Dr.Phool]

26. Today's St. Pete times said it was something like 140,000 in Florida alone.

[No Elephants]

70. No COLA for OASDI recipients this year or next as it is.

[gateley]

4. Will somebody explain to me if this is a good thing? A RW friend was pissed

because Biden told Spain we would support them in trying to avoid a Greece-like situation. " What???? We're broke, trillions in debt, and we're going to give Spain money?"

Thanks for any guidance.

[HughMoran]

5. Dow down 1000 in 10 minutes

:shrug:

[metapunditedgy]

14. Futures up huge tonight. n/t

[HughMoran]

15. right

[AllentownJake]

46. Of course they are

They are handing the banks money to put into the market lol

[AllentownJake]

45. ;-)

Allentownjake right again...

BTW they will get a bounce from this, banks love being bailed out which is what this is, it won't last. Each time they do this, they get less bang for the buck on doing it.

Eventually banks are going to have to make their money the old fashioned way, making decent loans based on risk and funding their operations off the interest.

However, they might as well party while they have the world governments in their pockets.

[AllentownJake]

44. It is kicking the can

and trying to save both American, British, and French banks.

BTW, Remember all that starry eyed we saved the world financial system from December....they were either lying or too stupid to see this coming, now sleep well on that.

[tomm2thumbs]

6. Kagan, the Fed and one as-yet-to-be-named story will keep the GOP scattering to respond

the White House is throwing so much chum to the sharks, they won't know what to chomp on first, and will be unable to organize a response to any of it collectively

smart, but still

[KoKo]

57. Yep....that Obama is one smart dude throwing that chum...

:D Also we need to bomb Pakistan. Keeping those Repug sharks in a frenzy.

[jillan]

7. No Problem! What's a little more debt between countries?

[boppers]

8. WTF?

Europe is going broke because of their social programs, and we're going to bail them out... when we don't even have the same benefits?

We're paying for European social programs that we "can't afford" here?

The mind boggles.

[ronnie624]

31. I think you're mistaken.

The problems in Europe are part of a much larger global crisis.

The world needs more public revenue devoted to social programs and less devoted to the purposes of war, imperialism and generating profits for corporate and political elites. Believe me, our species would be much better off.

[liberation]

32. Yeah, when some Americans open their mouth... the mind boggles indeed

Europe is not going broke because of their social benefits. European economies are having a tough time dealing with the worthless debt packages they bought from Americans, which for a few years in a row during this decade were OUR MAIN F*CKING EXPORT, and which are now defaulting left and right... leaving huge toxic holes, because the derivatives used to justify them... ballooned into the tens of trillions of dollars. With no actual real asset in the US economy to back them up.

Also there is the issue, that some European countries decided to align themselves with the US (*cough* Greece *cough*) and applied some of the great "creative accounting" techniques we are now world famous for. And now the shit hit the fan... and the rest of the Euro zone has decided to clean house. Something which may be painful, but which may need to be done.

I know a lot of you need to simplify things, regardless of how many leaps and bounds reality and facts have to suffer, in order to cater to a victimization narrative. And I be damned if some of you have it down to an art. But blaming this crisis, which is nothing but the aftershocks of our very own crisis, on Europeans having the gall of actually have some sort of social safety network... it is the epitome of both selfish entitlement and ignorance. Two things I am afraid some of my countrymen excel at.

And BTW, a lot of you have forgotten that had the Central European Bank, and the Japanese and Chinese to a lesser extent, not bought untold billions of dollars in 07 and 08... the dollar would have collapsed taking down with it basically the world economy.

[boppers]

41. I think that was aimed at me.

The most recent "crisis" in Europe on my mind was Greece, where workers (and retirees) felt entitled to 14 months of paychecks every 12 month year, "retiring" mid-career and then living off government funds for the rest of their life, while the government ran up the debt clock... to a point where 100% taxation rates would be required just to pay for the promised benefits. So, that's where that thinking was coming from.

I am amused about the victim narrative, so flipping it around, "poor helpless Europe gambled on the financial market, and lost". That's how gambling works.

Now they're broke, and can't afford their budgets. (Quick, what are their biggest budget costs? Don't be coy, what are their biggest national expenses?)

In this case, the gambling seems to have been global, and individual nations have been trying to figure a way out of it.... but hey, if they can get the US taxpayers to pay for their gambling habit, I guess they'll try. Heck, the US taxpayers bailed out the gamblers here, so.... ugh.

[AllentownJake]

52. The rioters are generally the youth

Who have shitty fucking lives. You really don't know that much about the situation going on in Greece.

As far as Europe as a whole goes, their entire selling point of their currency was that they wouldn't pull this shit.

[boppers]

56. The youth are pissed off that the elderly want...

I stopped typing for a reason.

[AllentownJake]

61. They are unemployed and unable to advance in society

Take a look at our youth, and you see OUR future.

[Citizen Kang]

55. um no

Greece has a sovereign debt problem, which means it has been paying out more in social benefits than it is collecting in taxes and accumulating massive amounts of debt which it can no longer pay back. Spain, Italy, Portugal are also in the same boat as is most of Europe. So yes, it is because of the social benefits that are not paid for by taxes and instead borrowed.

It is true that some private European banks are exposed to the US mortgage market, but that is not the source of the problem.

Also, how is it cleaning house when you are piling on more debt on top of the debt that you can't pay back in the first place? Just asking.

[fasttense]

58. That's quite a leap in logic.

"Greece has a sovereign debt problem, which means it has been paying out more in social benefits than it is collecting in taxes."

Greece can't pay back the loans it took. That is the bottom line. To make the leap without ANY logical connection or explanation that it is because they pay out too much in social programs is not reasonable.

How did they get into debt? Who loaned them the money? That's where you have to start. Yes, they are spending more than what they are brining in in taxes, obvious. But to say it all got spent on social programs, without any logical breakout of payments and review of payout and loans is like claiming global warming is caused by insects. There is NO logical connection there.

And why do these banks that made these very bad loans to Greece need to be paid back in full? Capitalism means you take risks. If you give out bad loans, you go out of business. If your risk was too great, you lose. Why are banks and Wall Street now immune from the ramifications of Capitalism?

It could be that the loans had balloon payments, or were adjustable (I know they don't call them that when a nation borrows but that is what they are in effect) and suddenly the payouts rose, or the fines and penalties added up, or any number of ways a loan can be very poorly managed.

First examine the loans themselves, then examine the budget. The budget includes 2 things - income (taxes) and expenditures. Examine the income, why are taxes so low? Who is paying and who is not? Then look at expenditures.

You provide none of the qualifying information to make such an assumption that it is all based on payouts, And not just total payouts, payouts JUST to social programs. You take a big leap there with no explanation.

[Citizen Kang]

78. How is that a leap in logic?

Greek military annual spending is only 4.3% of GDP. It's annual budget deficit is %12 GDP and its total debt is 125% of GDP.

What else does a government spend money on besides its military? Entitlements, social programs and government agencies.

They can cut the military but the bulk of Greece's budget deficit is from entitlement programs and the cost of operating government agencies. Instead of funding those programs through taxes or being responsible about what it could provide for its citizens, they chose to be reckless and borrow.

How about living within your means as a country?

The numbers are quoted in the opinion piece linked below

http://www.ctpost.com/opinion/article/That-s-Greece-in-the-mirror-440413.php


"In 2009: (1) government spending of $145 billion and revenue of only $105 billion translated into a deficit of $40 billion, or 12 percent of Greek GDP of $335 billion; and (2) to pay for this, heavy foreign borrowing pushed year-end outstanding sovereign debt to about $375 billion.

It doesn't take a PhD in economics to realize that you cannot overspend your income by almost 40 percent ($40 billion) when your debt is already 3.5 times your income. So, now, finally, this run of colossal financial irresponsibility in Greece is over.

But what drove it?

Rapid growth in government spending. According to official EuroStat figures, government expenditures almost doubled from 2000 to 2008.

Government employee compensation doubled from $19 billion to $37 billion, propelled by factors revealed in recent news coverage -- yearly pay comprised of 14 months' wages.

Social benefits for all citizens exploded from $28 billion to $62 billion -- on the strength of such other recently reported items as widespread government-funded early retirement at age 50 (as compared to 65/66 in the U.S. under Medicare and Social Security).

In 2009, government expenditures reached 43 percent of GDP."

[fasttense]

85. I say BS. It's all a load of crap.

The banks, like you, are pushing this meme. It's a scam, a con a load of crap.

12% of GDP. That's not excessive. It's the crappy loans they took. I suspect if you start to look at them closely you will find things like penalty payments, CDS that failed to pay out, bond speculation.

The banks that made the loans took the risk. Too bad they made crappy loans but this is capitalism and sometimes banks lose.

Why should an entire country's population suffer to pay back some cheats on Wall Street? Restructure the loans, pay back 20 cents on the dollar (or euro) then be done with it.

This is nothing more than a planned attack on sovereign debt. Banks who planned this should not get paid back.

[Demeter]

65. NOBODY Cleaned House--Not One Country

and as far as I can tell, only Norway didn't have to.

[mbperrin]

9. Oh, good, the US taxpayer has already bailed out the huge banks here

while losing their jobs, their houses, their standard of living.

WHY NOT bail out all the big European banks, too???


But single payer health for us - nope. Mortgage help when you lose your job - nope. Crushing debt to get a college education - sure.

[DFW]

10. And the dollar loses 2 full cents against the Euro over the weekend

Those cries of "Hilfe!" and "Au secours!" must have been pretty loud.

[JDPriestly]

37. I was going to say. This money is not charity.

It is being given in order to keep the dollar at the right level in comparison to the Euro.

[OhioChick]

11. Insanity n/t

[Dr.Phool]

13. You're right.

Some days it's just not worth chewing through the restraints.

[girl gone mad]

12. All I can do is laugh about it now.

They were warned what would happen once they started down the path of propping up failed banks and throwing good money after bad, yet our leadership chose to risk it all for a tiny bit of short term comfort. That didn't last very long, did it?

In the end, we will get "change", but I fear it won't be the kind any of us bargained for. :(

[HughMoran]

18. You'd rather the world economy collapses sooner than later?

Why?

[Dr.Phool]

21. What's the difference?

Sooner? Later?

Get the shit out of the system.

[HughMoran]

22. I have children, Phool

.

[Dr.Phool]

25. The whole system is on the verge of collapse right now.

There is no magic. Something has to give.

You don't solve a debt crisis with more debt. And where the fuck are we getting money to bail their banks out, when we're nearly bankrupt ourselves? Governments have two choices. Spending cuts, or additional sources of revenue.

At this point, the only logical solution is to raise taxes. In our situation, repeal the Bush tax cuts yesterday. Even raise mine a little. I don't care. I'm willing to make a small sacrifice for my country, but we can't keep living with this supply-side fantasy that cutting taxes will generate more income. It's a PROVEN lie.

There's a thousand things we could do to lower our deficit, especially breaking free trade agreements and re instituting tariffs. It would sure as hell kill offshoring and keep good paying jobs, which generate more taxes here.

[AllentownJake]

49. Really?

That is your answer, you have children. So you want your children to pay for this shit when they are your age. I'm assuming you also want grandchildren someday...do you want their life to be better or worse, because if this nonsense continues, it ain't going to be better.

[TheWatcher]

74. Hugh, AT LONG LAST, Can You Not Let Yourself See What Is Gong On?

Because of the methods being applied to solve this Crisis, it does nothing to SOLVE anything. It merely DELAYS the INEVITABLE and does nothing but transfer more wealth from everyone else to the Banksters who are holding the system hostage.

Another very astute, long time trader posted this on one of the many Financial Board I frequent last night, and it pretty much sums things up in a nutshell:

We have taken a banking crisis, and through nearly endless printing, have turned it into a full blown sovereign crisis, yet the market sheeple react as if it is good news.

Like a junkie pumping his arm full of Number 4, however, the high lasts for shorter and shorter periods, and the next fix must be bigger than the last. Bernanke and the ECB have fired the last bullet, I think. They have printed one less than the marginal fiatsco that makes all other previously printed fiatscos worthless. If this is not true, then I am going to open a Mona Lisa store and sell unlimited priceless Da Vinci's the same way most Motel 6 lobbies sell Salvador Dali "unlimited edition" prints on cold Saturday mornings.

It's like the classic Heroin Addict.

Every High takes more and more smack to get to where you want to be.

Until you reach that day when the body can no longer withstand what you are putting into it.

Overdose.

Collapse.

Joblessness and the debasement of quality of life is going to be tragically high if this is allowed to go on.

For the love of God, at what point do we take a step back and look at the magnitude of what is being done and realize that this is about something MUCH bigger than investing, MUCH bigger than money, and much bigger than PROTECTING THE STATUS QUO That you defend so mightily.

These Financial Terrorists have brought us to a precipice where they have put the whole of the planet's future of financial survivability at risk for most EVERYONE.

INCLUDING THEMSELVES.

And they don't care.

The Oligarchs and Criminals running this show want it ALL, Hugh. What you have, I have, and everyone else has.

There is no "Enough" with these jackals.

If we think we can be like Barnacles on the side of a ship, and be silent beneficiaries in the Big Party, we are WRONG.

You see, they want a world where they control EVERYTHING and you and I have NEXT TO NOTHING.

It's them and their agenda, and then there is everyone else.

And make NO mistake about this.

You and I, and everyone on this Board, and 99% of the people in this country INCLUDING YOUR CHILDREN are Everyone Else

Whatever short term gains can be made from this, IT DOES NOTHING BUT DELAY THE INEVITABLE.

The System will COLLAPSE at some point as a DIRECT RESULT of this nonsense.

This is what well-meaning people who can see what is really going on have been TRYING to tell you Since March of Last Year, but all we ever get from people like you is insults, talking points, and claims that we are "Doomers who want everything to fail."

If you care about your Children, yourself, or ANYBODY else, then WAKE UP and stop cheering this on.

THEY ARE NOT DOING THIS FOR YOUR BENEFIT. OR YOUR CHILDREN'S BENEFIT

AND THEY ARE THE ONE'S WHO WILL END UP PAYING THE PRICE

And You Are OK With This?

Exactly what Price would you have the rest of the World pay so you can continue to live in a false reality, willfully supporting the VERY CRIMINALS who are DESTROYING the SYSTEM, and the FINANCIAL STABILITY OF THE WORLD?

[HughMoran]

81. Sadly, you and Jake make critical assumptions and lack credibility

First, you assume a static economic model, during a recovery, the model is anything but static. Secondly, you scream in my face which has the effect of making me wonder about your intentions. If there was something for me to glean from what you were saying, then you would be able to explain it calmly to me WITHOUT THE RAGING HYPERBOLE. In other words, you have no credibility with me. Thirdly, why is it so imperative to have the system collapse NOW versus LATER? Is it not possible that, since the economic situation is on the mend, that even if a collapse is inevitable, active management of the situation may lead to a better outcome than simple saying "let it fail". I'm sorry, but you and Jake are too self-assured and this leads to my holding my arm out and saying "whoa! take a chill pill!". The fact that Jake is gloating about being 'right' based on my comment about the 1000 point drop tells me all I've ever needed to know. You and he may even be right in your predictions, but don't expect any accolades from me if the system does collapse - I may accidentally shoot you for trespassing on my property during the resulting anarchy. There are more important things than being right - I'd rather be a good person who is wrong, even about something so vital, than be a flaming ass hole with only a probability that my propositions will indeed occur. Convince a relatively calm economist like Krugman that your prognostications are indeed inevitable and I'll reconsider my position. Until then, stop screaming in my face, Mr Little.

[TheWatcher]

83. Hugh, you can insult me all you want, it doesn't change reality.

This is such a tiresome dance.

You think anyone that doesn't agree completely with your way of thinking has no credibility.

You accuse others of screaming at you, of "raging hyperbole", but the Truth is that you refuse to listen or consider any other point of view that does not fit the carefully constructed paradigm that you want to be true.

You are the King Kong of magical thinking, my friend, and this board is full of example after example.


I have seen you insult and mock plenty of posters that made reasoned arguments and backed them up with sources that were hardly based on hyperbole of any kind.

"Why is it so imperative to have the system collapse NOW versus LATER?"

Why are you so wedded to this line of thinking? Why do opposing points of view have to mean that anyone is wishing for an Economic Collapse, or the belief that such is "imperative"?

Is it not possible that, since the economic situation is on the mend, that even if a collapse is inevitable, active management of the situation may lead to a better outcome than simple saying "let it fail".

The problem is Hugh, the steps that are being taken hardly have anything to DO with Active management, OR the greater good. You CANNOT Print your way out of something like this. The "solutions" that are taking place are for the purpose of bailing out THE BANKSTERS at THE EXPENSE OF EVERYONE ELSE for the Purpose of Continuing their insane Ponzi Economic model that has brought the entire Global Financial System to the brink of Collapse.

They aren't doing this for you.

As Carlin once said: "They DON'T CARE about you."

This is FINANCIAL TERRORISM, plain and simple.

If you were open to other points of view besides the Propaganda that you believe and promote unquestioningly, you could easily figure this out.

I would suggest that you read Books like "Confessions of An Economic Hitman" by john Perkins, but since much of the information in that book falls completely outside of your carefully constructed belief system, you would probably completely dismiss it without even considering it.

And that's why you and I have issues Hugh. You simply are not willing to consider ANYTHING outside of what you want to hear, and what makes you feel good and comfortable.

And your assessment of people like me and Jake is so distorted and disgusting it simply makes me pity you.

We don't WANT the worst to happen.

We don't WANT the Economy to fail.

We Don't WANT Economic Armageddon.

We just want the truth, and we are tired of being lied to and played for fools. We are tired of Financial Terrorists playing games with our future.

And that doesn't make us assholes, and it doesn't make us bad people.

I'm sorry, but you and Jake are too self-assured and this leads to my holding my arm out and saying "whoa! take a chill pill!".

No Hugh, you don't take that approach at all. You insult, you attack, and you threaten to shoot us if the shit ever hit the fan. It's always amusing to me that you play the victim, when you attack like a rabid guard dog.

Besides, how many times over the years have you told me you have me on permanent Ignore? Why did you even see this post to begin with? if you hate me so much and wish me so much ill-will, why even bother responding? Why do you care?


As for convincing you of anything, why bother? You only believe what you want to hear, Hugh, and because of that, I can't help you, and I don't think anyone else can either

"I may accidentally shoot you for trespassing on my property during the resulting anarchy."

I fail to understand why this was even necessary. I shouldn't even dignify that with a response, but I will say that there are few things that intimidate me less than a thinly veiled threat from you on the Internet, that you have ZERO chance of ever making good on. I hope you're not that stupid. I really do.

Believe it or not, if you and your children ever showed up on MY property if the shit ever hit the fan, and you were desperate, I would not subject you to the same fate. As long as you meant me and my family no harm, I would put aside differences and try to actually HELP you.

Now which is the flaming asshole. Me or you?

Keep living the lie, Hugh. At this point, I really don't care anymore. I don't have anything else to say to you, and you don't have anything else to say to me.

Let's just agree to disagree.

[HughMoran]

87. You've taken my comments much too seriously

Why do you care so much that I question your credibility?

Why do capitalize the word "Truth" - as if you are an arbiter of such and others are simply fools?

Do you not see how arrogantly you've come across in your rant?

I never said I was right, only that I can't take inflamed hyperbolic rhetoric seriously - I know I'm not an expert. Convince me otherwise without the anger.

Why did you take my comment about dealing with the insanity of anarchy as a personal attack? Of course nobody would attack another who was not seen as a threat, but I was emphasizing the likely savagery of anarchy - it wasn't personal. I don't want that for my family.

You seem to like to pounce on me, but I've always scratched my head as to why - do I know you from somewhere? Perhaps you had another ID in the past that I'm not familiar with - we've rarely had intelligent conversation here so I'm not sure what relationship we have other than exchanging (not so) pleasantries.

I tend to forgive and forget, I don't actually want conflict, even though I have bad days too.

[AllentownJake]

48. This is where you people get me angry

This is going to happen. It has happened everytime in history when any deflationary debt crisis has occurred. There is no other way out other than to clean the bad debt out of the system.

What you are embracing is a system where we leave rotting corpses sitting around stinking up the world economy and killing any chance of us actually recovering from banks and world governments taking too much risk and debt.

The world is a heroin addict, the solution isn't more heroin to prevent withdrawal symptoms.

[HughMoran]

82. Hey Jake

Just so you don't feel left out, I replied to another DUer while also replying to you - http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=102&topic_id=4374774&mesg_id=4376062

It's not my best grammar, but I think you can catch my drift.

[TheWatcher]

84. Delete.

[fasttense]

59. Why NOT simply restructure the loans?

Why do banks in a capitalistic system need to be paid in full when they risk making bad loans? In normal capitalism, the banks who make the most unsafe most risky loans, lose. Some don't but that's why there is risk in lending.

The banks made bad loans, they should suffer the consequences for their reckless lending.

[wroberts189]

40. I cannot laugh ..but I agree. nt

[metapunditedgy]

16. A worldwide workers' strike would sure gum up the works right about now, wouldn't it? n/t

[Dr.Phool]

17. WTF? Dow futures are up 225pts on the news!

Nazquack +47

S&P +30 at 11:24pm.

http://money.cnn.com/data/premarket/index.html

[earthside]

28. Reality will set in ...

... maybe not tomorrow, may not next week, but one of these days the reality of all the contortions central governments and central banks are going through to prop of this mega-ocean of debt is going to set in.

And then -- the deluge.

[AllentownJake]

47. Reality has set in

The only thing that is going on right now is the elites are still partying like it is 1999.

That won't last long.

The banks are now free to trade with each other again, not worrying about what the other is holding on their books because the government will now back any collateral, no matter how worthless it is.

Its ironic, the debate to end too big to fail is simply ridiculous, too big to fail, fails without government support, it can be ended tomorrow and requires no action from congress.

[The Northerner]

19. If the Fed can grant money to Europe so easily, I wonder who else could be receiving some as well?

I really, really, wonder...

Hopefully, there won't be so much opposition to an audit of the Fed--oh wait...

[dipsydoodle]

54. Its not a loan.

Its to provide US$s in high volume for the purpose of exchange where required to cover temporary shortages.

[Petrushka]

20. K & R

[Joanne98]

24. Why don't they just borrow it from China like we do?

[Dr.Phool]

27. We did, so we could loan it to them.

[Oregone]

38. Wow. Just wow.

Credit makes the world go around

[Prometheus Bound]

29. I don't quite understand why everyone is upset about this.

It's a currency swap agreement with central banks against fixed assets to ensure enough foreign currency is available in Europe for business to carry on as usual. Am I missing something? It's not just the Federal Reserve making US dollars available. The Bank of Canada just said it would reestablish a US$30 billion currency swap agreement with the U.S. Federal Reserve.

[girl gone mad]

33. Where do you want to start?

The diminishing value of middle class wages and savings?

The continual scaling up of the crisis from one of private banking debts to where we are now at the point of sovereign defaults and a near currency crisis?

What next, will we need to call on SETI to find an Interplanetary Federation that can bail out the entire globe?

Trillion dollar bazookas aren't free, you know. Sooner or later, we'll pay the price.

[Prometheus Bound]

42. Since US$ is a reserve currency, isn't the Fed obligated to ensure enough dollars are available?

This isn't a gift. It's ensuring liquidity in the system. Unless I got it completely wrong.

[AllentownJake]

50. Depends on what the collateral is you are taking

If someone hands me an ounce of gold as collateral, and gold is trading at 1200 an ounce, giving a 1200 swap seems reasonable even though there is risk the value of the gold will decline, it has some value

If someone hands me a $1000 greek bond, that is essentially worthless and I give $1000 in the form of a no interest loan, that is in fact a gift.

Pretty much the argument on the 2nd lien mortgages on underwater housing that is in default. Banks are counting those assets as having value, when in fact the liens are already worthless because the 2nd lien has no claim on the underlying asset the house.

[girl gone mad]

53. It creates competition for capital..

giving more ammunition to the deficit terrorists.

[fasttense]

60. I want to start with why should the banks be rewarded with 100%+ pay back

on bad loans they made to Greece. If banks want to play the risk game, they should take the consequences of the risk.

[Prometheus Bound]

67. From what I understand this Fed currency swap is not part of the bank baillout.

It is to get lending in Europe started again. Apparently banks stopped lending last week, to anyone, like after the Lehman bankruptcy. But I assume with foreign central banks, the Fed is smart enough to demand legitimate collateral, unlike with American banks when it accepted worthless derivatives.

[No Elephants]

73. That is just not how things work in the global plutonomy. Get used to it

[depakid]

34. You're not missing anything from what I can tell.

[liberation]

36. You got it right...

... the issue is that a lot of people here would rather believe our current straits are due to those "entitled" Europeans, than on our very own homegrown systemic dysfunctional greed.

It is easier to have a convenient boogie man, than having to look ourselves in the mirror. Don't you know?

And that is how a simple currency swap gets turn into an European coup on the poor American working person in DU.

[AllentownJake]

51. This is about American banks

with significant exposure to the soverign debt issues of the PIIGs and the euro.

The Federal Reserve does nothing out of the "goodness" of its heart. It is protecting the American banking system with this action, this is not a goodwill effort.

Too big to Fail, has been saved for a second time.

[Ter]

30. This will add spark to those who believe they are creating a One World Government

New ammo for Alex Jones, I can see it now!

[conspirator]

66. Their are ... (sinister music) nt

[No Elephants]

75. It's damn near to a one world plutonomy. Geographical boundaries and the local

governments within them are quaint, amusing details.

[JDPriestly]

35. What's new?

[watajob]

43. Mayer Amschel Rothschild:

"Give me control of a nation's money and I care not who makes the laws." Greece is just the opening shot. Please fasten your seat belts. It's going to be a bumpy flight, followed by a big, smoking hole in the ground.

[totodeinhere]

62. Fuck that. Open a credit line to struggling American families who cannot make ends meet.

But no, they can't do that. Instead they will be propping up the rich European bankers just like they propped up the robber barons on Wall Street. And the beat goes on. Sigh.

[newspeak]

63. I agree-

It would be nice that the money be funneled from the bottom up-instead of getting trickled on. We put bandaids on banks and wallstreet--that money should go for job creation and aiding mainstreet.

[Unvanguard]

71. If there is a massive European financial crisis, everyone in the US will be hurt.

It has nothing to do with fairness, but rather necessity.

[totodeinhere]

72. It's a necessity? Well, why isn't it a necessity to help American families?

Why should rich European bankers have priority over every day Americans?

[Unvanguard]

77. Did you pay any attention to what I wrote?

It has nothing to do with how rich people are, and everything to do with how to ensure that the fundamentals of the economy do not fall apart. A major financial crisis in Europe would not stay put: it would spread, and it would do severe damage to the US economy, and to "every day Americans."

[JustABozoOnThisBus]

68. Europe is too big to fail?

Or maybe we'll lend a bunch of money to BP, so they can pay us for the oil cleanup in the Gulf.

[Prometheus Bound]

76. OK, now I'm starting to understand the problem with this. It's inflationary. Extremely.

Fed Set to Go Nuke to Help Bailout Europe

.....Needless to say this is complete and utter madness. It is extremely inflationary on a global scale.What's more, outside of banksters, no one in America will benefit from this move. Every one in America will suffer from the ultimate inflationary consequences.

The size of these swaps must be watched very closely. It does not appear that these funds will be stored as excess reserves. This means they will be out in the system. Every $100 billion added to the system in this manner (unless somehow sterilized by money drains elsewhere) will mean an immediate increase of 1.16% in M2 money supply. But this $100 billion would be high powered money. This means the final impact would be a multiple of the initial Fed money creation.

.....Bottom line: The Federal Reserve bank is on the edge of pushing the financial nuclear button, and print money in reckless abandon. Even if this were done for Americans it would be a terrible policy, but to do this for foreigners, where there would be little benefit for Americans reflects the extraordinary madness of the elite bankers.
http://www.economicpolicyjournal.com/2010/05/fed-set-to-go-nuke-to-help-bailout.html

[girl gone mad]

80. It may not be inflationary in the sense that you are thinking.

I can't really read your mind, but in terms of commodity, asset and price inflation, there are two necessary conditions. Every country that has suffered through a hyperinflationary period has had both conditions met - debt is monetized with massive printing and there is a sharply diminished productive capacity. We only meet one condition. Productive capacity is extremely unlikely to face pressure any time soon, not with our huge new global labor pool and the last few decades of high tech advancements.

The real danger is that this quantitative easing puts severe pressure on our ability to raise capital and the bankers' solution is always and everywhere to funnel more money to themselves by any every means possible. This is almost universally accomplished through cuts to spending on social programs. In this case they have had their sights set squarely on SS and Medicare "entitlements" for 20 years. They want that revenue to flow into their pockets and they will threaten to cease lending if they don't get what they want. Take a good look at what's happening in Greece. It's the same blue print they have used countless times now.

[Coco2]

79. Small business can't get a credit line, and individuals are paying higher interst, BUT...

This administration can give a nearly unlimited line of credit to Europes Goldman-Sachs wannabes! Yeah, boy is this CHANGE or WHAT?

I am so disgusted right now...I could just spit!

[Vinca]

86. Ditto what you said.

My husband's business is tanking because people can't get mortgages anymore.