World Banks Coordinate to Solve Euro Crisis, Markets Respond
- Posted on November 30, 2011 at 1:21pm by
Becket Adams
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Because the eurozone’s precarious financial situation has become an intolerable strain on world economies, several of the major banks have decided to step in and do something about it.
“This was in response to increased tension in global financial markets,” Bank of Japan (8301) Governor Masaaki Shirakawa said at a press conference in Tokyo today. “Coordinated action will give markets a sense of security.”
In an effort to help the EU, the Federal Reserve decided Wednesday to make it cheaper for world banks to borrow 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 Dec. 5, and extending these swap arrangements to Feb. 1, 2013,” reports CNN Money.
Watch the CNN update:
Overall, these efforts are meant to “ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and so help foster economic activity,” the Federal Reserve said in a press release.
“It’s a step in the right direction,” said Jay Bryson, global economist with Wells Fargo Securities, in a recent Bloomberg report. “It doesn’t solve the problem in Europe, but to the extent that European banks are having trouble raising dollar funding, it makes it easier and less costly for these banks to borrow dollars.”
In response to the announcement that world banks would make a concerted effort to assist the EU, markets surged:
Source: Google Finance
Source: Yahoo! Finance
“Together, the six central banks also created a temporary mechanism, making it easier for them to exchange their foreign currencies — not just U.S. dollars,” writes CNN. “That tool gives any of these central banks easier access to euros, Japanese yen, British pounds, Swiss francs and Canadian dollars should they need those currencies to assist their region’s banks in the event of a crisis.”
The theory is that these “liquidity facilities” will come to the aid of Europe’s debt crisis if, for example, things get to the point where foreign banks will have to step in to fund normal business transactions.
“These swap lines are being implemented as a contingency measure, so that central banks can offer liquidity in foreign currencies if market conditions warrant such actions,” the Federal Reserve said in a Q&A about the plan.
CNN Money reports:
Since May, the cost for European banks to borrow dollars from other European banks has been enormous. Through central bank auctions announced in September, these banks can borrow dollars at reduced interest rates, for periods of three months.
This is meant to lower the cost of short-term borrowing for troubled European banks, as well as give them immediate access to dollars. Today’s actions continue that plan and further reduce borrowing costs.
Rest assured, the Fed promises that the U.S. taxpayer won’t be on the hook is eurozone banks fail.
“The European Central Bank is the one actually making the loans, so the Fed is not on the hook if a European bank fails,” said Paul Ashworth, chief U.S. economist with Capital Economics.
At the same the Fed made its announcement, the People’s Bank of China announced that it planed to increase liquidity by “lowering its reserve requirement ratio for financial institutions by half a percentage point.”
“Two hours before the Fed announcement, China cut the amount of cash that the nation’s banks must set aside as reserves for the first time since 2008,” Bloomberg reports. “The level for the biggest lenders falls to 21 percent from a record 21.5 percent, based on past statements.”
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BuggiOlleo
Posted on December 1, 2011 at 1:12pmThis is beautiful..Since 2008, the Federal Government has needed Stimulus and QE2 for EU protection. Then this year, Obamma wanted the JOBS Bill?! All have failed..Now, the FED is just blatant;
Stimulus-Smimulus!
Do not worry NATO-EU; the FED has your back.. Ahhem! Scuse me guys? Aren’t we, like, BROKE… So, how is the FED picking up, not just American Auto Workers, broken SSI, broken Medicare and Medicade, broken US banking system, broken local and State Government(AFTERall the FED ‘shhhh’ isn’t part of the Federal Government)..etc, but now an entire continent!! of entitlement..
THe FED is actually coordinating a CENTRAL NATIONAL BANK OF THE WORLD..Look out BABY..THIS reaks of DAnger!!!! THe American TAx payer will be on the hook to pay for Retiring Workers of the WOrld( that’s the Socialist part of the EU..their Okay RIGHT?!) Whatever!! So, what about all us poor starving Taxpayers here at HOME..below the 200k mark, –The Fix is in..–Moreso, than Yestern, anyway!
Report Post »mikee1
Posted on December 1, 2011 at 7:58amThey are just trying to delay the BIG CRASH until the rinos get in.
Report Post »RossPoldark
Posted on November 30, 2011 at 10:23pmHouse of cards, and we all know what will happen in the end. This bailout should hold them for what, another 2 weeks if at that.
Report Post »TOMMYSURIA
Posted on November 30, 2011 at 8:06pmGermany got screw again. They were doing great with a banking system for the people, not the private interest of a few. Now they got suck into this euro bull and will go down the toilet also.
To bad the british will find an excuse to start another freaking war and screw everyone again…..
Wake up people; we are doing the same garbage all over again. Turn the tv off and start reading about history; maybe you all will wake up before obama sticks a boot on everyone’s behinds….
Report Post »A Conservatarian
Posted on November 30, 2011 at 7:50pmAnd who is the only candidate that would fight this banking cartel? Mmmmhm Ron Paul 2012!
Report Post »LPpaladin
Posted on November 30, 2011 at 7:24pmThey say that were not a one world government. Guess what our US tax money and US bank bailouts are doing for us? There not lending money to us. It’s all going to the have knots of the world.
Report Post »imsteph
Posted on November 30, 2011 at 7:23pmcorruption is corruption.
Report Post »bad policy is bad policy.
whether it is on a local, state, national, continental, or world level….it can all still go to hell in a hand basket.
this is nothing more than a shell game with the American tax payer holding the bag of c*ap in the end -as per usual.
goal is our enslavement to the rest of the world….and our erstwhile self idoler in chief is enjoying every minute of it.
because how dare America think it is better than the rest of the world.
a systematic, methodical, patient plan of destruction.
Lara
Posted on November 30, 2011 at 7:04pmThe left has been pushing for a “WORLD BANK” all along!!! Not long now and they will have their one world financial system when everything else breaks down and it comes running to save us all!
Report Post »desertdogtom
Posted on November 30, 2011 at 6:34pmI don’t see this as anything good for the long run. The world bankers passing around IOU’s with taxpayers footing the bill. Greece, or any of those socialist nations will not be good for the loans. When the $$ runs out it will be panic again! How much time did this almost trillion dollars buy?
Report Post »hauschild
Posted on November 30, 2011 at 4:10pmThe real question is why they vast number of investors feel this move is positive, when anybody with a reasonable mind knows it is anything but. And, how can you reasonably expect me to put myself at the mercy of the unscrupulous???
I’ve never witnessed anything quite like this.
Report Post »Firebrand
Posted on November 30, 2011 at 4:53pm@haus
Report Post »I think it’s because people have dropped common sense for “game theory”.
righthanddrive
Posted on November 30, 2011 at 3:41pmWhat is the World Bank doing here? The World Bank or International Bank for Reconstruction and Development (IBRD) is not a bank in the conventional sense of the term. It is an institution created to foster development in third world/less developed countries like Rwanda, Congo, Bhutan, etc. As the largest donor/contributor to this institution, the US should strongly protest this action. Where is Congress and why is the president silent – oh neve mind that last bit. I feel so used!!!!!
Report Post »Firebrand
Posted on November 30, 2011 at 3:32pmDoes anyone know if there is a law requiring the Fed to get congressional approval before entering into a financial decision using taxpayer money? It sure seems like “consumption without representation” to me. I would like to think that people weren‘t so stupid as to just give control of our monetary system to a group of people without oversight by the people who’s money is affected…
Is the justification that if they “print it fresh” that it never belonged to the taxpayer? Even though the value of every dollar held by taxpayers goes down as a result?
Report Post »David
Posted on November 30, 2011 at 3:44pmThe announcement isn’t that they will be printing money (although, they may be doing that). The announcement is that the Fed is making it easier for countries who can’t pay back loans to take loans from us. Why is that bad? Because it is the 2008 Housing Crisis all over again, except this time we aren’t dealing with individuals taking loans. We are dealing with nations.
Report Post »Firebrand
Posted on November 30, 2011 at 3:53pm@ David
Report Post »But does the American public have any say in the form of representational approval?
David
Posted on November 30, 2011 at 5:19pmWell, since the Federal Reserve is quasi-governmental, Congress does have some power over them. But until Congress recognizes that the Federal Reserve is a collusion of banks designed to gain power and control, there is little hope of Congress taking any action.
Report Post »tbl10
Posted on November 30, 2011 at 6:14pmYou don’t really think that Congress is going to bite the hand that feeds them the money that allows them to buy votes do you?
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