Monday, November 28, 2011
Things That Start To Make Ron Paul Sound Sensible
Bloomberg has a detailed examination of the data that the Federal Reserve refused to release, until ordered to do so by the courts: They lent almost $8 trillion to the "too big to fail" banks, enabling them to survive, give big raises to their employees, and screw over those who were foreclosed. The New York Times is reporting that the Democrats have given up on white, working class voters for next year, figuring that they are going to lose them to the Republicans, and figure that only college educated whites and blacks and Hispanics are going to vote Democrat--and hope that this is enough. Now, if only Republicans decided that they wanted to win.
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Two of the top five were European banks. Barclay's number five at $641M. Still, that's quite a bit for a bank that's primarily European in focus to need in a US credit crunch. But Barclay's is heavily leveraged, like most European banks.
ReplyDeleteNow the European banks are hoping to have the Fed save them again since they're in a credit crunch since they've been denied dollar funding in more traditional markets like money market funds. The amount we're talking about that would stabilize Europe would make the amount in the linked article look tiny since the European political system is making ours look well oiled these days. If the Fed could even intervene without terminally hurting the dollar as well as causing mass chaos in Europe. A massive QE3 for European bonds, for example, would save the banks, but the subsequent blast of inflation and spike in Euro against the dollar would hammer European exports and Germany in particular. The political effect to US intervention on such a scale would be problematic, also. And none of it would have any impact on lessening the structural problems of the Euro zone, it would just buy more time.
There's a creditor's strike going on against the Euro right now and the effects aren't pretty. There's no lender of last resort like the Fed in Europe, and unless the ECB ignores the law and its charter there's nobody to print Euros to save the banking system, which is why the speculation about the Fed coming to Europe's rescue is now being floated. The problem is that the European banking system is not only the world's largest, it's also the most leveraged in the world (as the above linked article notes). Jim Cramer on CNBC talked about the Euro situation and put us on "DEFCON 3, two stages away from a financial collapse so huge it's hard to get your mind around." I normally don't put much stock in that Cramer, but he may be onto something here.
We're living in interesting times, with financial shenanigans unseen before so Ron Paul is actually sounding more like a sage these days.