Wednesday, November 30, 2011
Central Banks' Efforts to Cheapen US$ Swaps
Today's move by central banks around the world to increase the liquidity of the US$, by reducing the transactions costs of currency swaps, effectively lowers the 'price' of the US$ to European banks that are now under pressure to serve as lenders of last resort to the public purse. It is not quite a debasement of the US$, but the move can potentially wiped out billions of dollar denominated public debt. It's akin to printing a lot of money to pay the bills. It does not address any of the structural problems caused by runaway government spending. But it is a clever move with the potential long term consequence of domestic U.S. price inflation. It's payback for the European worker's funding of the U.S. consumer's spending habit. Merry Christmas!
at 8:23 PM