European leaders negotiated into the early hours of Monday before reaching a deal in which governments that use the euro would join the EU and International Monetary Fund in putting up euro750 billion in loans available to prop up troubled governments. The European Central bank will buy government and private debt to keep debt markets working and lower borrowing costs, a crisis measure dubbed the 'nuclear option,' while the U.S. Federal Reserve joined with other central banks in the effort, reactivating a currency swap program used during the earlier stages of the financial crisis to ship dollars overseas to be pumped into banking systems as short-term credit. [emphases mine]And according to Rush's take on this fact,
I want to talk about money first, the fact that nobody has any. We have just bailed out Greece and the European Union. The borrowing window at the Federal Reserve is open, almost $1 trillion. Now, you might be saying, "What do you mean, we? I read that the European Union..." The European Union showed up at Ben Bernanke's borrowing window, and guess what? We're loaning them a trillion dollars, but it's unsecured. There's no collateral. If they go belly up, guess who's paying for it, folks? You and me. Now, we haven't even gotten to bailing out California yet, and they're in worse shape than Greece. They're printing Euros to handle all this. Nobody has any money. We are witnessing right before our very eyes what happens with unchecked, uncontrolled socialism and worse.
The IMF is fulfilling its purpose, but it appears that America is bailing out Greece. Just an interesting point. This article makes an interesting observation about the consequences of America's level of debt.
Quick answer: I think you nailed it.
ReplyDeleteThe EU, IMF, & US (but I repeat myself), have come up with a plan to save Greece's bacon at least temporarily, which should warm the cockles of Melkor's heart. It is kicking the can down the road, but it does seem to be having the desired effect temporarily (and costing US, German, and French taxpayers a lot of money). Let's see if Greece can shape up and this can hold, or if this is just a temporary respite for them.
From everything I read, this bailout won't--just like the bailouts here in America didn't--make the systematic and fundamental structural changes necessary for a real change in the direction that Greece and the whole world is headed. Look at how Greeks are responding to the cuts--rioting. That does not indicate that a real change will be allowed to happen--so the downward trend will continue. Just another trillion dollars that does not exist that is being wastefully spent.
ReplyDeleteAmerica is becoming more like Greece, and the situation they are in will be coming our way. America's states are to some extent America's counterpart to EU's PIIGS. The funny thing about this is that as part of agreement to getting a bailout, Greece is being advised to privatize their government run health care system and their other government-run sectors. It is also funny to have Obama calling Spain urging them to cut public worker's pay. What makes this funny is that America just passed a bill that will lead to a government-run health care system and the federal government has increased its hiring and wages for those workers. So America is going down the very same path that Greece has been down and we see where that has led to.
The thing is that if Greece, or the rest of the world, makes the necessary-fundamental changes, a depression or major downturn will occur and if the world economy continues on the path that it is there will be an even greater down turn. So either way, a major downturn is coming.
http://mises.org/daily/4365
This whole juggling of debt and paying for debt with more debt is exactly like a scam artist whole gets a loan and pays for that loan to buy another loan and so on until it finally collapses. http://www.givemeliberty.50megs.com/An%20Economics%20Lesson.htm
Fundamental change in the world economic structure WILL NOT OCCUR. Look at the root cause of the problem to see why--cultural, people, and philosophical. I no longer doubt that a major world economic downturn will occur. I would love for someone to give me some information that states that this won't happen or since a negative can not be dis proven, I would like some information stating that the economy will recover and get back on the right path before a major downturn. I am in the process of accepting that this will not happen.
"Given that governments are reluctant to take their lumps now, what are the odds that they will do the right thing — outright default and debt restructuring — three years hence when the debt bubble is that much larger, the economy is in worse shape, and the pain of default and austerity is much higher than today's? The words "slim" and "none" come to mind. The world is firmly ensconced on the path to an inflationary depression." [This will be a turning point in the structure of the world economy and its political structure.]
ReplyDelete"Given this dire outlook, what is one to do? Starting or acquiring a business, preferably one that is not capital intensive and could still function in a highly inflationary environment, is the surest way to preserve and maybe grow your wealth. For the vast majority for whom entrepreneurship doesn't come easily, dollar-cost averaging into precious metals such as gold and silver and select other commodities isn't such a bad idea to protect one's life savings. Inflationary depressions transfer wealth from holders of paper assets to holders of hard assets. The bailout has bought a modicum of time for the PIIGS before the noose tightens once again. Fortunately, it has also provided time for the prudent and informed to prepare for the crisis and acquire hard assets while the getting is still good."
Read more: A Greek Tragedy in the Making - Ganesh Rathnam - Mises Institute http://mises.org/daily/4365#ixzz0nlVlTk7T