Fed, global central banks move to boost financial system (Got Inflation?)

MSNBC ^ | 11/30/2011 | By Patrick Rizzo

[TSgt]

The U.S. Federal Reserve, acting with five other central banks, took steps Wednesday to boost the troubled global financial system by making it cheaper for banks to trade in U.S. dollars.

The Fed -- along with central banks of the eurozone, England, Japan, Switzerland and Canada -- announced a coordinated plan to lower prices on dollar liquidity swaps beginning on December 5, and extending these swap arrangements to February 1, 2013.

[whitedog57]

Global Central Banks Go to Defcon 4 - “Fire up the printing presses, gang!” Or at Least Swaps

http://confoundedinterest.wordpress.com/

Look at Euro bond yields versus US yields. US yields actually ROSE. IT ISN’T A LIQUIDITY PROBLEM, IT’S A SPENDING AND DEBT PROBLEM!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

[Buckeye McFrog]

so basically they’ve just monetized the Eurodebt into our economy?

Time for the pitchforks yet??

[biff]

Speking of bullets, is it time for the killin’ to start yet and where do we start?

[John W]

+330 in the first ten minutes.

[AnAmericanAbroad]

That’s one way of looking at it.

Being a long-term American expat over here in Europe, all I can say, is “Thanks!” for taking on the debt of the useless eaters over here on the Continent (the PIIGS).

You guys are generous to a fault back in the USA.

Ben Bernanke.....playin’ it like a boss.

(just a little cynical humor, no offense but heavy sarcasm intended)

[Rapscallion]

a deliberate and concerted effort for the U.S. Government (and other nations), to spend as much money as they can to collapse the economies of the entire world

It does look that way, but the question then really becomes "Why?"

[Rapscallion]

a deliberate and concerted effort for the U.S. Government (and other nations), to spend as much money as they can to collapse the economies of the entire world

It does look that way, but the question then really becomes "Why?"

[ladyvet]

As someone who really does not understand this, what does it mean for the middle class American family already struggling to make ends meet?

[Darth Reardon]

We borrow 40% of what we spend. About 6% of total spending is interest on debt.

[TSgt]

It means the cost for just about everything will go up.

[TSgt]

Meanwhile I’m trying to close a loan under $100K with perfect credit, an insanely low debt to income ratio, 25% down, and even greater equity due to a good appraisal and I can’t get the bank to move.

[JDW11235]

Ah ok, that makes sense. Can you tell me if 40% of the money collected in income taxes (rather than total spending) is the same amount that we pay in interest payments? For some reason I recall the interest payments being 40% of something else, but it might just be the 40% of spending is borrowed, as you said. Thanks in advance, either way!

[JDW11235]

Well, people are trying to acheive different goals. Some are trying to acheive one world government. Others an army of dependent serfs. And still others are simply anarchists. They all serve the same master, though, Mammon.

[Darth Reardon]

I'm pretty sure the 40% you are thinking about is that we have to borrow 40% ($1.4T) of what we spend ($3.5T).

Interest on debt ($200B) is equal to about 22% of the amount collected in personal income taxes ($900B).

While I hate to recommend wiki, there are a couple nice pie charts near the top of the page on the federal budget that might help.

BTW, there are about 100,000,000 actual taxpayers (by taxpayer I'm referring to tax returns filed which show positive tax payment, so a married couple will count as one "taxpayer" in this example) in the US. Restating the numbers above in terms of 'per taxpayer', the government borrows about $14,000 per year, while spending $35,000, of which $2000 is needed for interest payments.

Or, if you want to consider how the gov't spends your money in dollars per hour, that's about $7.00 per hour borrowed, $17.50 spent, and $1.00 on interest.

As a percentage of average household income, 28% of what "you" make is borrowed so the gov't can spend 70%. "Only" 4% of what you earn is needed to pay debt interest.

You know, when I look at it in these ways, I wonder. Is my math that bad, or are we thoroughly hosed?

[Deo volente]

I found this on another site. Note the release date:

http://www.federalreserve.gov/newsevents/press/monetary/20080918a.htm

Press Release

Release Date: September 18, 2008

Today, the Bank of Canada, the Bank of England, the European Central Bank (ECB), the Federal Reserve, the Bank of Japan, and the Swiss National Bank are announcing coordinated measures designed to address the continued elevated pressures in U.S. dollar short-term funding markets. These measures, together with other actions taken in the last few days by individual central banks, are designed to improve the liquidity conditions in global financial markets. The central banks continue to work together closely and will take appropriate steps to address the ongoing pressures.

Federal Reserve Actions
The Federal Open Market Committee has authorized a $180 billion expansion of its temporary reciprocal currency arrangements (swap lines). This increased capacity will be available to provide dollar funding for both term and overnight liquidity operations by the other central banks.

[socialism_stinX]

This move by central banks helps the European banks but does nothing to solve the big problems Italy and Spain are having with sovereign debt refinancing. There still aren't any buyers for Italian sovereign debt other than the ECB and a few risk-taking institutions. There's no reason for the huge move up in our stock market today. The action in our stock market looks like a blatant intervention by the Working Group (aka the "Plunge Protection Team"), in which they bought the S&P futures before the market opening to cause a big gap up opening and screw short sellers. This kind of intervention in the equity markets, besides being totally unethical, is dangerous policy because it inflates stock prices up to artificially high valuations, and that can cause a sudden disorderly collapse in stock prices when most buyers step back from the market at those artificially pumped-up prices.

We're living in a Banana Republic now where the current regime intervenes routinely in the financial markets in an attempt to get the regime re-elected next year. This regime needs to get its hands off the financial markets and only intervene in a true market crisis where there is a total absence of buyers, and we're not in that kind of crisis now.

[JDW11235]

“You know, when I look at it in these ways, I wonder. Is my math that bad, or are we thoroughly hosed?”

We’re thoroughly hosed! Thank you for taking the time to post that back to me and for all of those statistics/numbers. I really like the breakdown you gave. I like to think about things in terms of man hours (or other real world measurements) when the number is too big to be able to comprehend. I don’t think there is a person alive who can fully grasp a number like 150 Trillion dollars, etc. So when you put things in the terms of dollars per hour per person and things like that, i really appreciate it. I think one reason that these numbers get more and more grandiose is because the people running the show know that after a certain point, people no longer understand nor really care. The math goin on here is literally mind boggling. And I just read your clear and easy to understand post, again, and again, Thank you!

[Mariner]

This will have very little real impact.

However it is a sign that the Euro is failing. Nobody wants it.

The Fed is offering to exchange dollars for Euro's very, very cheap. The intent is to ensure EU banks have sufficient liquidity to endure a run of small to moderate proportions.

However, it's impossible to treat a Debt problem with simple liquidity.

The bottom line is there is not enough money in the hands of those who OWE to pay back what they owe.

Until such time as the Fed issues a check for $10k to every man, woman and child in the world...the Debt Deflation will continue it's slow, inexorable grind.

[Razzz42]

The banks know another 40% haircut is coming. Whether it’s a devalued dollar or real estate values falling more or both they are seeing a loss on lending to you at today’s interest rates.

[Razzz42]

Forget about making money, just preserving what you have is the real challenge.