Did The Dramatic U.S. Fed Action Rescue The Global Economy?

The U.S. Fed moved quickly with its banking partners the European Central Bank, and the banks of Canada, England, Japan and Switzerland to expand a program providing emergency cheap U.S. dollar loans to European and other banking institutions to try to prevent a collapse of the global financial system. In response, global stock markets skyrocketed. But did this solve the severe financial problems?

No, it was a desperate act to confront a pending state of financial chaos. Wednesday (11/23) when Germany, a nation with strong finances, couldn't sell 40% of its bonds, it told everyone how grave the situation really is. Possible defaults, contagion and collapse starting with the falling dominoes of Portugal, Ireland, Italy, Greece and Spain which are no more able to meet their financial obligations now, than before the dramatic U.S. Fed and bank partner intervention.

To bail them out, the European Central Bank (ECB) and the International Monetary Fund (IMF) demand those nations' governments layoff thousands of people, raise taxes, slash salaries and cut retiree incomes. This when those nations are already sinking into severe recessions and suffering from high unemployment. The people won't stand for it and have rioted in the streets. Further cuts will never happen and governments that pursue them will fall.

All the dramatic U.S. Fed and banking partner actions did was buy time to keep the global financial system functional for now. As for calming investor fears, that will be brief when they realize insolvent nations are simply creating the illusion of bailing out other insolvent nations. Ultimately the ECB, the IMF and the giant corporate banks and mutual and hedge funds are going to have to take huge write offs on their European debt and they will plead for massive bailouts from nations no longer able to provide them.

So please take actions to protect yourself from the very tough times to come. Cross train to become more valuable to your employer, add skills that will generate income and pay down your credit cards and other debt. Sell off any unused items such as an extra car, motorcycle or boat, things you can convert to cash. You will be thankful you did these things.

Dick
To learn more about this dramatic financial intervention, please see "6 Central Banks Act To Buy Time in Europe Crisis," The New York Times, http://www.nytimes.com/2011/12/01/business/central-banks-move-together-to-ease-debt-crisis.html?_r=1&nl=todaysheadlines&emc=tha2