I fear I'll regret tossing this out without a lot more explanation, but I'm pressed for time today and I didn't want to leave it. So here it is:
No one wants to admit it yet, but the only way the Euro can be saved in it's present format is if the US federal reserve funds the bulk of it's bailout. And the size of that funding will be far more than can be indirectly offered to foreign banks through the support of US debt prices. They'll have to save it, and almost certainly admit to saving it. The only other option is a Euro that contains Germany, or the PIIGS, but not both.
I don't know what would persuade Bernanke to do it, but that doesn't change the fact that the only way it's going to get done, is if he does it.
The implications of that are certainly something to think about.
2 comments:
Hasn't the Federal Reserve already lent out billions to foreign central banks?
Technically yes, but not in any way that increases inflation. the Fed has also intruded in the US treasury market, artificially supporting prices of US debt.
Since many foreign private banks are holders of US debt, their portfolio's are indirectly supported by those debt purchases.
But neither of those is really such a big deal compared to what they'll have to do if they want to save the Euro as is.
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