Well, that’s not precisely the headline over at Business Insider, but I take exception to theirs; so, I fixed it for them.
ECONOMIST: Bernanke Is Going To End Up Bailout Out All Of Europe
Federal Reserve Chairman Ben Bernanke’s apologetic take on the Fed’s negative role in causing the Great Depression may translate into a willingness to bail out Europe, writes economics blogger James Pethokoukis.
Bernanke will not be willing to let the European Central Bank’s ineffectiveness infect U.S. banks and destroy the global economy.
He points to statements from well-known independent economist Ed Yardeni to elaborate on that idea:
Given the ECB’s reluctance to act, I suspect that the Fed will spearhead the formation of a Global Liquidity Facility (GLF) to avert a global financial meltdown. Fed Chairman Ben Bernanke demonstrated that he is a master at putting together such emergency measures back in 2008. In effect, it would act as the world’s central bank. Mr. Bernanke is clearly very worried about the prospect that the European sovereign debt crisis is a contagion that could spread to the US, as evidenced by his bizarre town hall meeting with troops returning from Iraq on November 10. The GLF would receive deposits from the Fed and other participating central banks, including the ECB. The funds would be used to buy the bonds of debt-challenged governments that would be required to accept strict supervision of their fiscal and regulatory policies by the IMF.
Regardless of Bernanke’s avowed commitment to save the United States from a repeat of the Great Depression, the political will to truly prop up the rest of the world doesn’t seem to exist in the U.S.
If Congress is breathing down the Fed’s neck, just wait until the “U.S. taxpayer” is absorbing the fiscal profligacy of Italy and Greece.
Here’s the problem: Bernanke doesn’t HAVE anything with which to bailout Europe. Yeah, yeah, he’s got his ‘printing press’ but you see, the thing doesn’t work without DEBT. He can only fire that thing up when there is actual demand for debt. Except no one can afford a loan. No one wants a loan and no one is going to borrow in this economic depression. So, Bennie’s printing press has a big old crow bar stuck in it.
So, what will he do? What bankers have been doing since they came into existence. Use the governments they control to force the taxpayers to supply the debt demand. Since 99% of us cannot take on any more debt, the government will do it for us. They’ll just spend money they don’t have, creating more demand for debt, and the Federal Reserve, in its benevolence, will oblige and provide the loans. More debt on the backs of the US taxpayer. Thus my change in Business Insider’s headline.
One must understand that the Federal Reserve and its member banks (the primary dealers all private, for-profit, institutions), which are responsible for the creation of our money through demand for debt, are lending to our government, which in turn, allows our government to spend money it doesn’t have. The reason that the private banks do this is because control of the government is how they can get to the taxpayer. The taxpayer is an ‘infinite’ source for the payment of interest, even as the money for payment of that interest is never created. In essence, the leverage, from their perspective, is unlmited. The banks profit off of all Americans regardless of whether or not Americans personally borrow money. This is why you see our US Treasury Secretaries working hand-in-hand with the Federal Reserve, which is completely contrary to the US Treasury Secretary’s job description, which is supposed to be to protect the assets (that would be the taxpayers) of the United States.
Bankers never intentionally lend at a loss. Never.