Gloom, Despair and Agony, Not to mention Desperation--- On them

by shakes4life Wed Nov 30, 2011 10:33 pm

Gloom, Despair and Agony, Not to mention Desperation--- On them

Posted By: Watchman
Date: Wednesday, 30-Nov-2011 20:12:37

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The coordinated swap line bailout
by the Federal Reserve Bank of Canada, the Bank of England, the Bank of
Japan, the European Central Bank, and the Swiss National Bank- and
China’s reduction of reserve requirements by .5% – shows desperation.
(For background on swap lines, see this, this and this.)

The Street notes:

Don’t get flustered by the
terminology of “dollar swap lines” above. Here’s a more simple
explanation: Central banks around the globe have acted in desperation to
boost liquidity in the system, which has sparked a rally in equities.

In a separate article, The Street points out:

What’s great for the banks
isn’t so good for everyone else, though. Investment strategists already
are noting the desperation of the move, adding that flooding the banking
system with liquidity doesn’t do anything to solve the real problem of
ballooning, unmanageable debt levels.

Ron Paul said today:

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.

link: http://www.washingtonsblog.com/2011/11/central-banks-latest-move-shows-desperation.html

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