By Christopher J. Petherick
The heads of the world’s leading central banks announced in a joint statement on September 15 that, in order to quell concerns about a deepening of the global economic crisis, the privately owned and controlled U.S. Federal Reserve would have to flood the upper tier of the world’s financial system with even more U.S. dollars by providing “unlimited U.S. dollar liquidity” to any financial institution around the world that asks for a handout.
Financial analysts were quick to characterize the move as nothing more than a transparent attempt to bail out the European Union’s struggling euro currency and defer an imminent default on Greece’s massive debt.
The concern here is that the move will further tie the United States to European countries like Portugal, Ireland, Italy, Greece and Spain, which have been struggling under debts accrued by past governments as well as onerous economic regulations set by the European Central Bank.
But more importantly, the latest bailout will only serve to benefit the mega-bankers, just as all the other sweetheart deals and zero-interest-rate loans that came before it.
For instance, as the dust settles on the Federal Reserve’s much-ballyhooed $2 trillion “quantitative easing” program, which was ostensibly intended to help Main Street by providing a boost to the U.S. economy, critics now charge that the banks that took part in the program either pocketed the money to bolster their own books or invested it for their own profit.
And keep in mind that this will not be the first time that the Fed has bailed out the world’s central banks. In August 2009, Federal Reserve Chairman Ben Shalom Bernanke was put on the hot seat at a congressional hearing after he could not remember which foreign central banks the Fed had loaned a half trillion dollars.
“So who got the money?” asked Representative Alan Grayson (D-Fla.) at the time. “I don’t know,” responded Bernanke. “Half a trillion dollars, and you don’t know who got the money?” countered Grayson.
To this day it remains unknown just how much the Federal Reserve is on the hook for, since the Fed has never been fully audited. Geoffrey Yu, the director of foreign-exchange strategy at UBS Bank in Switzerland, told London’s Telegraph newspaper: “This doesn’t change anything. It helps the banks for the next couple of months, but that’s it.”
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