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Old 12-19-2011, 05:41 PM   #1
Kryfamid

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Default Fed May Inject Over $1 Trillion To Bail Out Europe.
I really don't know what to say because when you come right down to it I really don't know what the hell is going on, all that the Fed is doing is to push the rest of the world deeper into the barrel of shit and at the end be the owner of all that they can see or touch.....am I right on this?.................remember that WE gave them the rights to do this.
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Fed May Inject Over $1 Trillion To Bail Out Europe.

Submitted by Tyler Durden on 12/18/2011 21:21 -0500

Bear Stearns Ben Bernanke Bloomberg News Discount Window Duration Mismatch European Central Bank European Union Eurozone Fisher Freedom of Information Act Gross Domestic Product International Monetary Fund Japan Lehman Royal Bank of Scotland Testimony


As first reported here, two weeks ago European banks saw the amount of USD-loans from the Fed, via the ECB's revised swap line, surge to over $50 billion - a total first hit in the aftermath of the Bear Stearns failure prompting us to ask "When is Lehman coming?" However, according to little noted prepared remarks by Anthony Sanders in his Friday testimony to the Congress Oversight Committee, "What the Euro Crisis Means for Taxpayers and the U.S. Economy, Pt. 1", we may have been optimistic, because the end result will be not when is Lehman coming, but when are the next two Lehmans coming, as according to Sanders, the relaunch of the Fed's swaps program may "get to the $1 trillion level, or perhaps even higher." As a reference, FX swap line usage peaked at $583 billion in the Lehman aftermath (see chart). Needless to say, this estimate is rather ironic because as Bloomberg's Bradely Keoun reports, "Fed Chairman Ben S. Bernanke yesterday told a closed-door gathering of Republican senators that the Fed won’t provide more aid to European banks beyond the swap lines and the discount window -- another Fed program that provides emergency funds to U.S. banks, including U.S. branches of foreign banks." Well, between a trillion plus in FX swap lines, and a surge in discount window usage which only Zero Hedge has noted so far, there really is nothing else that the Fed can possibly do, as these actions along amount to a QE equivalent liquidity injection, only denominated in US Dollars. Aside of course to shower Europe with dollars from the ChairsatanCopter. Then again, before this is all over, we are certain that paradollardop will be part of the vernacular.

Historical ECB swap line usage with the Fed, and projected assuming $1+ trillion in use. Just to put it all into perspective.



For all those lamenting the ECB's lack of willingness to print, fear not: the almighty Chairsatan has vowed to valiantly take his place when needed. As in 2 weeks ago. From Bloomberg:

European financial companies led by Royal Bank of Scotland Plc were borrowing about $538 billion directly from the Fed when the central bank’s emergency loans to all banks peaked at $1.2 trillion on December 2008, according to a Bloomberg News examination of data released by the Fed under last year’s Dodd- Frank Act and earlier this year under court-upheld Freedom of Information Act requests.



The Fed hasn’t provided any estimates of how large the swap lines might get, said David Skidmore, a Fed spokesman. He declined to elaborate.



“To get above $600 billion wouldn’t be a stretch,” said Desmond Lachman, a former International Monetary Fund deputy director who’s now a resident fellow at the American Enterprise Institute, a conservative public-policy center in Washington. “You’re talking about a European banking system that is huge in relation to that of the United States.”



Josh Rosner, a banking analyst with New York-based Graham Fisher & Co., said the Fed’s swap lines may end up helping Europe support banks that might not deserve emergency loans.



“As a result of this commitment of financial support, we’re now supporting undemocratic approaches implemented largely by authorities who have demonstrated an ongoing inability to either recognize the scope and scale of the problems or come to a consensus on the proper approach,” Rosner said.



The ultimate size of the swap lines is “unknowable at this point,” he said.

For those wondering what all this means, we remind you that there was a roughly $6.5 trillion synthetic (duration mismatch) USD short as of 4 years ago, as we reported at the time. That short has gotten substantially larger following a 4 year regime of the USD as a funding currency courtesy of ZIRP. Which means that any time the liquidity shortage threatens to collapse the system, the first thing to go stratospheric will be the USD as the global financial system scrambles to cover its short. It also means that anything the Fe and/or ECB can do from a pure printing standpoint will be peanuts compared to the utter carnage unless the dollar short is not preserved. Which naturally means that it is up to the Fed to continue drowning the world in either nominal dollars, or swapped ones, such as under the form of a USD-EUR swap, which is nothing but a forward operations. In essence, with the FX swap lines, the Fed engages in the ultimate currency warfare tool: it sells dollars to the entities most needy. And it does so, because if it doesn't, said needy entities will implode, and the hollow financial dominoes will topple, leading to a mess that not even infinite synthetic or real printing of binary of paper dollars, euros, or anything else will do to fix.

Which is why all those wondering if gold should be bought now or the second after the ECB starts printing, we have one piece of advice: just look at the chart above. It says all one needs to know.

Lastly, since the Sanders testimony is worth a read in and of itself, we recreate it below. Some of the choice selections:

The Eurozone is teetering on collapse and it has been decades in the making. The cause of their problems is 1) excessive government spending leading to 2) excessive government debt coupled with 3) slow GDP growth.



If we look at Household and Financial Debt in addition to Government Debt, the UK’s Debt to GDP ratio exceeds 900%. Japan is over 600% and Europe is almost 500% Debt to GDP. The U.S. is over 300%. In summary, Euro, Japan and the U.S. are drowning in debt. And a recent article from economists at the ECB that finds:



The European Union will unify, break up or downsize. But regardless of what option they choose, they still have too much spending and debt relative to the ability to pay for it: GDP growth. But additional debt is not the answer. It is the problem.



The obvious solution is austerity (reduction in government spending). But making loans to the European Central Bank or individual countries doesn’t solve the underlying structural problems; it only makes the Debt to GDP problem even worse. It is simply a short-term solution and actually encourages the Eurozone to delay making the hard decisions.

http://www.zerohedge.com/news/fed-ma...ail-out-europe
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Old 12-19-2011, 06:04 PM   #2
thierabess

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damn, didn't the fed include europe in the 27 trillion dollar bail out? now another trillion? a trillion here, a trillion there....lol
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Old 12-19-2011, 06:50 PM   #3
uMG6uOSo

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Someone needs to inject the Fed with some lead. Hey that rhymed.
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Old 12-19-2011, 06:53 PM   #4
AmericaAirline 111

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That is part of QE-E plan


Quantative Easing Europe

our tax dollars and printing presses hard at work.
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Old 12-19-2011, 07:20 PM   #5
viagsjicguara

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That is part of QE-E plan
qe until infinity, rehypothecating until taxpayers wind up with less than nothing, owing their mind, body, and soul.
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Old 12-19-2011, 09:59 PM   #6
orison

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Because the Fed created that money from nothing they then should be paid with nothing.......I hope that that's what Ron Paul will do.
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Old 12-19-2011, 10:42 PM   #7
Deengealf

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Out with the old in with the new.
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Old 12-19-2011, 10:53 PM   #8
medshop

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Different not but with the same master.....shit is shit no matter how you show it.
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Old 12-19-2011, 11:40 PM   #9
gortusbig

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A trillion is only one football field stacked 2 pallets high of 100$ notes.........chicken feed
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Old 12-19-2011, 11:50 PM   #10
ggandibazz

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conomy-sinking-ship.jpg
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Old 12-19-2011, 11:52 PM   #11
slarceSelia

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I wonder how many mortgages a trillion would pay off, for folks unemployed and underwater in their homes.

Instead of bailing out honest Americans, they want to send it overseas. Crooks bailing out Crooks.
So what you're saying is that everyone should just pay for their own shit?
ie if the gov creates sufficient $ via debt to pay off the peoples debts, we're all just payin' for own shit plus the cost of running the "program". Why not just cut out the middle-man?
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Old 12-20-2011, 12:05 AM   #12
KuevDulin

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I guess what I'm saying is why are we on the hook for the bad decisions in Europe? The whole Euro idea is a disaster. By bailing them out, we are getting in bed with them.

If we are going to just print money and give it away, give it to American's that can actually get some tangible benefits from it. Don't make it a gift, but rather a reasonable way for them to get their lives back on track. I'm sure it could be done.
It is trying to prop up the whole house of cards, that has been built. Europe is one of our best customers, and if they bite the bullet and crash , they WILL take us down, plants will close and employes laid off or fired.

So in a sense we are tied to them. Which totally sucks but if they do not buy our stuff, we crash along with them, just like a string of dominoes.
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Old 12-20-2011, 12:21 AM   #13
velichay

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As I see it.........I give them worthless green backs and they give me py precious toilet paper that has million of different uses, to me that's a bargain...........think about it.
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Old 12-20-2011, 12:27 AM   #14
Duaceanceksm

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the whole purpose is to maintain the dollar...make loans to europe in dollars. voila, marshal plan 2.0, the dollar gets stronger, all our problems are solved.
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