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View Full Version : Global Demand for Dollars is Skyrocketing



Conley
11-30-2011, 09:28 AM
WASHINGTON — The Federal Reserve (http://topics.nytimes.com/top/reference/timestopics/organizations/f/federal_reserve_system/index.html?inline=nyt-org) moved Wednesday with other major central banks to buttress financial markets by increasing the availability of dollars outside the United States, reflecting growing concern about the fallout of the European debt crisis (http://topics.nytimes.com/top/reference/timestopics/subjects/e/european_sovereign_debt_crisis/index.html?inline=nyt-classifier).

The European Central Bank borrowed $552 million through the existing facility during the week ending Nov. 23 to meet the liquidity needs of European banks. Data for the past week is not yet available.


Under the new terms of the program, the existing interest rate premium of 0.1 percentage points on those loans will be reduced by half, to 0.05 percentage points, effective Dec. 5.

The other central banks said they had also agreed to make similar loans of their own currencies as necessary, but they noted that the only extraordinary demand at present was for dollars.

http://www.nytimes.com/2011/12/01/business/central-banks-move-together-to-ease-debt-crisis.html?hp

So the Fed is lending millions of dollars to foreign banks for have a percent interest. Doesn't that seem odd? Basically giving the money away and the best case scenario is that their banking systems don't collapse. How is this good for the U.S. and the American people?

Pendragon
11-30-2011, 09:51 AM
There are two very obvious reasons for this action. First and foremost, Europe is our ally. The United States depends on Europe for many things. Secondly, a global financial meltdown benefits no one. While you may think that capitalism means being a greedy pig, real economics are far more complicated and the Federal Reserve is doing what it can to prevent further currency devaluation and collapse.

Peter1469
11-30-2011, 07:15 PM
This action does not prevent further currency devaluation and collapse, it only kicks the can down the road. And if the European banks and nations uses this new liquidity to go on a spending spree they will be making their big bubble that much bigger. That = a bigger crash in the future.

The only solution is to deleverage debt.

ritchie
11-30-2011, 07:18 PM
It looks like this is just going to make the inevitable collapse worse for the United States. The worldwide demand for dollars is good though.