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G8 Nations Join Fed Reserve In EU Trillion Dollar Bailout

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Silver

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I guess I missed this in the news, maybe it was discussed here in the forum, but I thought this was interesting. And scary.
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Spurning China, the Federal Reserve wizards have pulled yet another trillion dollar rabbit out of the worn-out US hat. Using our nation as hostage, the Fed issued this money to foreign speculative banks so they won’t go bankrupt…AGAIN. Saving the same drowning gnomes twice in thrice count years is…ridiculous, insane as well as stupid. According to the top financial newspapers, this trillion+ rescue operation will cause more…inflation. This will weaken the dollar which is OK with our many exporters who want a cheaper dollar but then, this will cause Japan and the EU to sink even deeper in the mire. The problem is, their ability to capitalize their own banking systems depends on a strong dollar which is why they all held trillions of US trade dollars in FOREX holdings!

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Well, all FX traders who sought to ride this pony were either bucked off today by this sudden overt, open, totally wrong intervention or, if they were in the know and gossiped with fellow Bilderbergers who hang out socially and text message each other, they all made a huge, huge killing in the FX markets today. But the little guys were badly burned, big time. This battle in the floating fiat currency platform is now being conducted mainly by the giant central bankers with their associates who run the ‘too big to fail’ banks making the bets in this obviously rigged game and getting extremely rich while outsiders are stripped bare.

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Which is why so many less artful, less connected, less knowledgeable investors are fleeing to that familiar home base, gold.

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WORLD FOREX: Euro Jumps After ECB Floods Banks With Dollars – WSJ.com

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In concert with the Federal Reserve, Bank of England, the Bank of Japan and the Swiss National Bank, the European Central Bank announced a move to pump dollars into European banks. With the euro zone’s debt crisis unresolved and fears of a Greek default on full boil, bank shares have been punished by investors nervous about a replay of the 2008 financial crisis…Investors “had talked themselves into a major funk, so anything was going to be seen as a positive move,” said Frances Hudson, global thematic strategist at Standard Life Investments, which has over $250 billion under management. The market had gotten to the point where it felt there would have to be concerted, global action.”

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Germany dug in its heels and refused to be the only entity to bail out all of Europe. ’Nein, nicht, nada,’ was the answer and so, in a total panic, all of the surrounding central banks in this bizarre story suddenly, with no warning, jumped in and did what they begged China and Germany to do: lend the struggling central banks of the EU over a trillion dollars. Now that this has been secretly done, all is well and all the asinine speculators and traders who are causing all of this ruckus are happy as larks while the burden falling on the people who are held hostage by the central bankers has gotten worse.

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Above all, the US has been telling the American citizens, there is no more FEMA money, we are broke. There will be no more Social Security, we can’t just hand out a trillion dollars, can we? We have no money…except if the world needs another $6 trillion bail out dollars, hello! We got it! Every penny! How much? Another trillion? Fine! Takes but one minute to type in all the zeros and then hit ‘send’ and voila! It is in a foreign bank account. Now, since we are talking about the floating fiat currency free trade system, this action, like the earlier one in 2008, has severe consequences in how we resolve trade issues.

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The ECB’s move effectively increases the supply of dollars currently in circulation globally. In the near-term, that implies a weaker dollar, as banks race to avail themselves of greenbacks and resort to less selling of Europe’s common currency.

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Is there a shortage of dollars in the world? Yikes! Don’t all the central banks of all the countries who trade with us already hold over $4 trillion of our currency in reserves? How about that? What does this mean to us? Will this become a weaker dollar or…will the wily EU central bankers park all of this loot in their FOREX holdings? Take a wild guess.

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Does Japan want a weaker dollar? Does Europe? A resounding no! They will push and pull and warp and shove the money hither and thither until the get a strong dollar again. But the first thing is, to get the US to stop making government debt. Which is why we will all be put on a starvation diet so that the dollar will become scarce since dollars handed out to American citizens are mostly spent, not parked in commodity markets, central banks or the back pocket of bank speculators. No, we mostly spend this money buying things and trying to make families and stay alive.

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THIS money will be chocked off to make the dollar stronger again so we can resume lopsided trade. Here is another problem with a weak dollar thanks to the Fed handing out goodies to stray EU bankers who did stupid things (selling $100 billion in debt to Greece is by any definition, insane and stupid): The Risks Lurking in Treasury Bonds – Bloomberg

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As risky as that sounds, millions of investors are moving money into Treasury bonds as a “safe haven.” In early September, the yield on the 30-year Treasury bond sank to a new low of 3.27 percent, while the 10-year note fell to 1.9 percent. If the inflation rate stays anywhere close to its current modest 3.6 percent pace, long-term investors will be guaranteed to lose money after factoring in inflation’s toll…The risk Kaufman and other managers are worried about is something most bond investors haven’t had to deal with since the 1970s — the prospect of a sustained rise in interest rates. When rates go up, bond prices fall as their yields are less attractive compared with new bonds issued at the higher rate.

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Ben Inker, director of asset allocation at Grantham, Mayo, Van Otterloo, a Boston money manager, calculated what the damages would be if, say, yields on Treasury bonds went up just three percentage points, driving prices down. The answer: a 23.5 percent loss for the 10-year Treasury and a 40.7 percent loss for the 30-year bond.

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Japan went ZIRP nearly 20 years ago. If it leaves ZIRP-land, it will be vaporized. The load of government debt is the biggest on earth vis a vis GDP and #2 in total, the US issues the most overall debt. The joke here is, deep in debt ZIRP powers are bailing out Europe which is no where as near in debt, not even little Greece, compared to these two crazy giants. The debt giants are bailing out the EU and the world’s biggest economy is NOT the US at all, it happens to be the EU.

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If this causes even more inflation, debts here will have to have higher interest rates. How long will the Federal Reserve cling to the insane ZIRP lending? They are doing this despite already rising inflation. The connection between reality and the printing of trillions of phantom dollars to hand out like candy to a bunch of crooks and idiots is getting worse and worse. These problems are multiplying, not being reduced.

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This is the old ‘moral’ problem: bail out bankers and irresponsible bankers become even more irresponsible. They only learn if burned badly, preferably, put in prison or even more radical schemes (the French know what I am talking about here). In the news today is a report from the Global Regulators at IOSCO to Tighten Rules To Make Easier Tracking Market Abuses
 

hypocritexposer

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I'm sure if they just tax the guy/gal making $200,000 or more, everything will be just fine.....


.....the middle/lower classes will be hit with the inflation.
 

Mike

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IDB - Investors Business Daily
Bailouts: Treasury Secretary Tim Geithner was dispensing advice in Europe Friday as the Fed began printing massive amounts of money to bail out the EU. Our government seems more worried about Europe than the U.S.

With Europe on the verge of another financial crisis, the Federal Reserve and European officials announced a three-stage "liquidity" program under which the U.S. central bank will supply dollars so Europe can buy its own bonds and keep the region's economy from going under.

Geithner and the Fed are doing in Europe just what they did here: printing huge amounts of dollars and using them to buy public debt, a kind of mega-stimulus.

This may stave off a collapse of Greece, or Italy, or Spain, for a while. But ultimately, it will fail. After the default of Greece and one or two other fiscal wastrels, the euro zone could collapse — with disastrous results.

Why? This mega-stimulus fails to address the euro zone's actual problem — just as $3 trillion in "stimulus," TARP and Quantitative Easings I and II in the U.S. failed to address our problem: too much debt from too much spending.

In 2007, the euro zone's public debt was a high but manageable 66%. Today, it's 88% — and rising fast — in the danger zone for mass defaults. "Europe is in danger," warned Polish Finance Minister Jacek Rostowksi last week. "If the euro zone breaks up, the European Union will not be able to survive."

In that context, our actions in fact amount to a bailout not only for European Union banks — but also our own.

As columnist Robert Samuelson notes, "Europe accounts for about 22% of U.S. exports. It provides perhaps an eighth of the foreign profits of major U.S. multinational firms. U.S. banks and investors would suffer losses on their European loans and investments.

And that doesn't include the $658 billion lent to Europe by large U.S. money-market funds.

Bailouts won't last, however, because euro zone countries have been reluctant to follow fiscally responsible policies. Under the original Stability and Growth Pact that established the euro, countries were required to maintain deficits of 3% of GDP or less, and to keep their total debt burdens below 60%.

But it had no teeth. There was no real way to punish members such as Greece, Spain, Italy and Portugal that spent themselves into bankruptcy and then expected wealthy nations such as Germany and France to bail them out.

German Chancellor Angela Merkel has come under intense pressure from other European nations to come up with more money. Some in Europe have even proposed creating new "euro-zone bonds" backed not by individual countries, but by all zone members.

This would be a huge, irreversible mistake leading to the eventual bankruptcy of all 17 nations that are part of the euro zone.

The real problem is that Europe has created a massive welfare state that its shriveled, undynamic economies can no longer support. Until this is recognized and spending is slashed, its profligate nations will only careen from disaster to disaster.
 

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