Daylife/Reuters Pictures used by permission
After months of quietly watching from the sidelines, the United States finally intervened in the European debt crisis on Sunday night.
The Federal Reserve announced that it would open currency swap lines with the European Central Bank — in essence, printing dollars and exchanging them for euros to provide some liquidity for European money markets and banks.
The step came after a hectic week in which Washington began to fear that the sovereign debt crisis threatened to infect the American economy and hamper its recovery, according to several United States officials…
The intervention, which also involves the central banks of England, Switzerland, Canada and Japan, is part of a colossal package intended to quell the restive credit markets with a show of force and resolve that American policymakers had quietly believed was lacking. The package has two other elements: about $950 billion in loan guarantees from the European Union, and a decision by the European Central Bank to intervene in the bond markets through a series of refinancing operations…
“It became increasingly clear that, if they were willing to take very strong measures, that it would be in the interests of the United States to encourage and support that,” one American official said…
In a statement, the Fed said the currency swaps were intended to make it easier for European companies, institutions and governments to borrow dollars when they need them, “and to prevent the spread of strains to other markets and financial centers…”
The Fed actually made money from the previous dollar swap program. The foreign central banks paid the Fed interest equivalent to what they made from lending the dollars. The Fed, however, did not pay any interest on the foreign currencies it took in exchange, having agreed to hold them instead of lending them out or investing them in the private markets. The new program is designed the same way.
None of which will punch through the minimal comprehension level of teabaggers and Republican ideologues.
Our native demagogues will continue jingoist rants as if the whole world is out to steal the 401K belonging to every NRA member. I expect the anti-semitic wing of the teabaggers will somehow connect this to secret manipulation by Goldman, Sachs. Rush Limbaugh will polish up his copy of the Protocols of Zion.
Banks and the Federal Reserve will quietly continue doing what it is they are supposed to do. Lend and borrow money. The dollar ends up stronger.