Kicking the Can Down the Road in Europe
The Federal Reserve pumping dollars into Europe is just a mild kicking of the can down the road. There is no way that Greece, Italy etc will get the political will to embrace the austerity and capitalist policies necessary for them to have a chance to pay their debts.
Of course loaning them more money even cheaper puts our dollar at further risk. It seems that what the Federal Reserve is trying to do is delay the Euro collapse until after the election.
AP:
FRANKFURT, Germany (AP) -- The central banks of the wealthiest countries, trying to prevent a debt crisis in Europe from exploding into a global panic, swept in Wednesday to shore up the world financial system by making it easier for banks to borrow American dollars.
Stock markets around the world roared their approval. The Dow Jones industrial average rose almost 500 points, its best day in two and a half years. Stocks climbed 5 percent in Germany and more than 4 percent in France.
Central banks will make it cheaper for commercial banks in their countries to borrow dollars, the dominant currency of trade. It was the most extraordinary coordinated effort by the central banks since they cut interest rates together in October 2008, at the depths of the financial crisis.
But while it should ease borrowing for banks, it does little to solve the underlying problem of mountains of government debt in Europe, leaving markets still waiting for a permanent fix. European leaders gather next week for a summit on the debt crisis.
The Euro banks are so over leveraged that as confidence in the Euro declines more and more people will pull their money out and buy gold, silver, or dollars, BUT the banks have loaned out so much money to governments that they could not possibly pay off the depositors. Unless something changes in a big way, the Euro seems finished.