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Fed pumps further $630 billion
Dominant Social Theme: Thank goodness for liquidity. Free-market analysis: We've lost track by now of the bailouts and the billions. The very latest bailout, the largest ever, didn't get done yesterday when the American House of Representatives wouldn't take the plunge. So that's $700 billion that won't make it into the "economy" tomorrow. But not to fear, they will try again. And in the meantime, the US Federal Reserve is immediately stepping up to the plate and releasing another $600+ billion "into the global financial system" whatever that means. All right, we probably know what it means. But it is also important to note that these huge sums of money are not bailing out banks. They are bailing out the system itself. The system of fiat money, that is. Unfortunately, the larger financial conversation seems to revolve around various kinds of finger-pointing. Seen this way, the "crisis" is functioning as a gigantic Rorschach test for various economic orientations. The Europeans see in it a repudiation of the American "cowboy culture" of finance. Americans, Democratic and Republican, see the crisis' causation as either an absence of regulatory authority or too much regulation. There are a few free-market types (America's Ron Paul comes to mind) who have made the point that the current crisis is just one of a string of crises that has taken place over the years and decades - and that the instability of 3 the financial system (based on creating money out of thin air) is growing as these crises occur. But meanwhile, central banks the world over can't be bothered with this sort of speculative analysis, no matter how true. They have more important things to accomplish - mostly the printing of more and more money to provide additional credit to banks whose loan portfolios are going sour. Conclusion: Literally trillions of dollars of fiat money have poured into the world's economy recently. It is an unprecedented splurge of liquidity and makes those who predicted vastly increased inflation as a result of previous loose money policies look fairly prescient. Of course, there are also those who predicted deflation and they can point to the fall of prices, especially in real estate, as proof positive that deflation or at least disinflation is taking place. However, also bear in mind that there is a difference between de-leveraging and deflation. Whether or not the latter will occur on a widespread level is still a question. What is not questionable is that the amount of money sloshing around Western economies today is vast and growing with all the consequences that an expanded money supply portends. We would like to hear your thoughts on today's Daily Bell. To share your feedback, send us an email at CustomerService@ARBP.ch |
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The Federal Reserve will pump an additional $630 billion into the global financial system, flooding banks with cash to alleviate the worst banking crisis since the Great Depression. The Fed increased its existing currency swaps with foreign central banks by $330 billion to $620 billion to make more dollars available worldwide. The Term Auction Facility, the Fed's emergency loan program, will expand by $300 billion to $450 billion. The European Central Bank, the Bank of England and the Bank of Japan are among the participating authorities. The Fed's expansion of liquidity, the biggest since credit markets seized up last year, came hours before the U.S. House of Representatives rejected a $700 billion bailout for the financial industry. The crisis is reverberating through the global economy, causing stocks to plunge and forcing European governments to rescue four banks over the past two days alone. - Bloomberg