[seldom_seen]

$this->bbcode_second_pass_quote('', 'E')CB Lends Record $622 Billion in Bid to Ease Crisis

FRANKFURT -- The European Central Bank pumped a record €442 billion ($622 billion) into euro-zone money markets Wednesday in its first-ever offer of one-year funds as it battles the Continent's recession.

Euro-zone banks borrowed the one-year funds, the largest amount the central bank has ever dispersed in a single shot, at the ECB's current key rate of 1%.

http://online.wsj.com/article/SB1245837 ... lenews_wsj

[mattduke]

It was coordinated with the Fed meeting to help prevent the dollars from dropping against euros.

[gnm]

$this->bbcode_second_pass_quote('mattduke', 'I')t was coordinated with the Fed meeting to help prevent the dollars from dropping against euros.

[DantesPeak]

The Fed is indeed trying to drag the ECB along for the hell ride.

Remember last fall the Fed financed $550 billion in dollar ‘swaps’ that had the intended purpose of providing liquidity to foreign banks – most all in Europe. That has been reduced to $100 billion lately. So effectively those European banks may have been looking for $450 billion or so to replace low cost and easy Fed money.

The $650 billion is now provided by the ECB as of today, but Europe's banks will have to repay $150 billion in another operation on July 1 – so the net effect by the ECB is $500 billion in new money.

The Fed also announced today that it is extending its swaps, so with the $100 billion still outstanding the net new money given to Europe’s banks is about $600 billion.

New money given by the Fed to US banks over the last year is about $1 trillion.

The inflationary effects of this $1.6 trillion in new money could take up to another year to impact the money supply, but the banks have use of all the money and could start using it in the way they chose at any time.

[shortonoil]

DantesPeak said:

$this->bbcode_second_pass_quote('', 'T')he inflationary effects of this $1.6 trillion in new money could take up to another year to impact the money supply, but the banks have use of all the money and could start using it in the way they chose at any time.

[DantesPeak]

$this->bbcode_second_pass_quote('shortonoil', '
')This is like the county coroner passing out party favors to the corpses!

[shortonoil]

DantesPeak said:

$this->bbcode_second_pass_quote('', 'e')ven if the only purpose is to effectively pay for government deficits by printing money.

[DantesPeak]

$this->bbcode_second_pass_quote('shortonoil', '[')b]DantesPeak said:

$this->bbcode_second_pass_quote('', 'e')ven if the only purpose is to effectively pay for government deficits by printing money.

[shortonoil]

DantesPeak said:

$this->bbcode_second_pass_quote('', 'T')herefore we are on an upward curve of ever increasing money creation, to be shortly followed by an upslope in interest rates as the game is revealed and reviled. That will lead to a feedback cycle of even faster money creation, and more rate increases.

[pablonite]

$this->bbcode_second_pass_quote('shortonoil', 'A')merica will pay for this insanity with everything they own.

[DantesPeak]

$this->bbcode_second_pass_quote('pablonite', 'T')he government is completely capable of creating it's own money interest free but over the years have become subservient to international banking dynasties.

[shortonoil]

pablonite said:

$this->bbcode_second_pass_quote('', 'H')ow absurd. The Fed is NOT the government - they are a private banking cartel. The money is created out of thin air by the "Fed" and loaned to the government at interest insuring perpetual debt for the people.

[DantesPeak]

$this->bbcode_second_pass_quote('shortonoil', '
')With better than $60 trillion in bond debt now floating in the US, monetary formation through credit creation is now falling short on the order of $1 trillion to service that debt. To keep the system from entering a stage of massive cascading defaults the FED must now inject that shortfall directly through monetization.

When the FED monetizes they buy assets forcing their price upward. This produces the effect of driving the returns on these assets downward. This results in a reduction of value for all other asset classes, driving their returns upward. Interest rates increase.

As there is now insufficient credit origination to create the funds to service the debt that already exists, the FED is being forced to monetize to create those funds. These monetized funds are now reducing asset values with the reversed leverage which is built into the fractional reserve banking system. That is, asset values are now being reduced at a rate equal to the monetized debt times the fractional reserve leverage rate.

With reserve limits now about 5%, (probably a lot less), that ratio is at least 20:1. Each $1 trillion monetized is now destroying 20 in asset values.

[shortonoil]

DantesPeak said:

$this->bbcode_second_pass_quote('', 'H')owever despite continued weakness in asset prices, particularly for housing, the net overall cost of living will increase only faster. This will occur even while incomes drop through unemployment – as government spending will, at least in the near term, overcome that and increase faster than the income drop.

[DantesPeak]

$this->bbcode_second_pass_quote('DantesPeak', '
')The $650 billion is now provided by the ECB as of today, but Europe's banks will have to repay $150 billion in another operation on July 1 – so the net effect by the ECB is $500 billion in new money.