Again, not sure what this all means:
Central banks moved Thursday to assuage fears that European banks could be threatened by a shortage of dollars, as they were at the height of the 2008 financial crisis, and opened new lines of credit to institutions in the first such show of force in more than a year.
Stock markets rallied after the European Central Bank said it would allow banks to borrow dollars for up to three months, instead of just for one week as before. The E.C.B. said it was acting jointly with the Federal Reserve of the United States, the Bank of England, the Bank of Japan and the Swiss National Bank.
It was the first coordinated effort to provide dollars since May 2010, and seemed to go beyond just providing reassurance that European banks would not be cut off by American lenders wary of their financial state. The central banks seemed determined to demonstrate that they would not hesitate to deploy their combined weight to keep the European sovereign debt crisis from becoming a bigger threat to the global economy.
“They are getting together and acting together,” Christine Lagarde, the managing director of the International Monetary Fund, said in Washington on Thursday. “To me, that is the most important message.”
I really don’t know what people think is going to happen that the economy is going to right itself. I guess we will just sort of meander through the next decade or so wondering WTF until someone says “Hey- if more people had jobs, they’d be buying shit.”
Linda Featheringill
Are they stocking up on US dollars because holders of Euros are getting nervous?
“This Euro is backed by US dollars.”
They may be in trouble over there.
Sportello
Dollar-denominated money market funds are no longer lending to some French banks. So now they can get them from the ECB.
ThatLeftTurnInABQ
My not very highly informed take on this is that the central banks are trying to make sure that if/when Credit Default Swaps linked to the Eurozone crisis go BOOM! that it doesn’t create a very large scale liquidity crisis which in turn morphs into a run on the Euro banks. And they need lots o’ dollars to do that.
If you know a fire is coming, fill the buckets up ahead of time.
fasteddie9318
The fact is that our Galtian Overlords don’t care anymore. Back before The World became Flat, most of the ultra-wealthy still had some vested interest in the economic strength of their own country. That’s not true anymore. The global super-class has no national allegiance. Wherever a market or a middle-class emerges, they go dump their toxic, cheaply-made crap on that market until they suck it dry, then they move on, leaving debt and unemployment in their wake. If America is lucky, in a half-century or so they’ll finally make their way back here, pump up a consumer market, then suck it dry in about a decade, and move on again. But in terms of the Henry Ford principle that employees need to be well-compensated in order to create a market for manufactured products, it just doesn’t apply anymore. These guys don’t want to cycle money back through the economy to keep things humming, they want to take everything and scorch the earth behind them. Today’s rich aren’t participants in the economic system, they’re parasites off of it. They’re more akin to locusts or viruses than people. They extract everything they can from one place, wrecking the place in the process, and then they move on to the next host. We’re just another host about to be killed off.
Whew, I’m glad I got that off my chest.
LGRooney
There’s a lack of faith in EU-denominated bonds now and people are looking for a safe place to park their money. So, because our ultra-number-one economic CRISIS is our deficit spending and debt scaring away investment in this country, people want to park their money here in the good ol’ USA.
IOW, anytime you’re arguing economic sanity with some teabagger, remind them that our interest rates are still very low because people consider this a safe place, and people are looking for US-denominated instruments because this is a safe place.
aisce
it’s the same thing the fed did for american and european banks in 2008-09.
money market funds and other lenders aren’t trusting eurobanks with piigs sovereign exposure with their dollars and dollar-denominated assets. this is a problem for an international finance industry that depends on access to dollars and dollar-denominated assets. so the central bank steps in to maintain adequate short-term lending levels to keep the banks operational.
it works if there’s only a liquidity crisis. as 2008 demonstrates, it does nothing to ward off a solvency crisis. no one posting on this board is qualified to tell you which, if any, eurobanks are insolvent or will become so.
so you’ll just have to see.
ThatLeftTurnInABQ
@fasteddie9318:
Spot on, and worth noting that this is the logic of a biological virus at work. Infect the host, exploit its resources, propagate yourself, and after that who cares if the host dies.
Works great until you run out of new hosts to infect.
Poopyman
@fasteddie9318: Yeah, well you’re far from the only one I’ve heard saying pretty much the same thing, from both sides of the political chasm.
I’m afraid that the arc of this story is already too predictable.
FlipYrWhig
What’s particularly maddening is that this rather obvious statement gets sidetracked into a rather arcane and distant debate about what kind of work qualifies as a real job. You’d think the important part is giving someone a damn paycheck. But instead the whole thing devolved into why The Government just giving someone a damn paycheck is anathema, “socia1ism,” “welfare,” etc., so the government has to come up with Rube Goldberg contraptions that give money to entities to give money for projects for which people can be hired and paid. It’s just asinine. I would happily be paying people to go back and forth on highway medians transplanting sod from one side to the other. But, no, we can’t do that, it’s not The Government’s place. GAAAAHHHHH.
Linda Featheringill
@fasteddie9318:
Nice rant. And no argument from me.
Comrade Dread
And that person will be rightly defined as a no-good filthy parasitic communist bastard and burned at the stake for his heresy against the Church of Rand.
ThatLeftTurnInABQ
@FlipYrWhig:
Bernanke’s vaunted helicopter isn’t working too well at getting money into the hands of anybody who will spend it, is it? Like one of those storm clouds in the desert where the water evaporates before it reaches the ground.
Svensker
@Linda Featheringill:
A friend just got back from Ireland and she said everyone she talked to there has pulled money out of the banks because they’re terrified the Euro will fall apart or Ireland will pull out and their bank accounts will be worthless. She said people are trying to get other currencies or gold and are keeping it at home.
Montysano
@ThatLeftTurnInABQ:
That’s my not-very-informed take as well: that the CDS situation in Europe is much larger and more complex than it was in the USA in 2008.
catclub
@Sportello: “Dollar-denominated money market funds are no longer lending to some French banks. So now they can get them from the ECB”
… which is getting the US dollars from the US FED? yes?
Cat
Banks sometimes need cash to payout to people but since they are required to keep very little cash on hand they have to borrow it from someone else. Think of it like a payday loans for banks, but since banks are run by “respectable” people they arent charged 500% interest.
Some people, smart people in IMHO, think the EU denominated bonds backed by several countries are soon to be worthless and the banks that hold the worthless bonds will thus not be able to give back the cash lent to them in a timely maner. Most of these bank payday loans are overnight or other similiar short time periods so any delay in repayment will cause then loan originator huge problems as well.
So the ECB and the Fed saying that they will loan USD to the banks isn’t really news worthy as they do it all the time now. The newsworthy part is that the repayment period will be months and not days like usual. You can infer that means the ECB/FED thinks there is a good chance there will be a crisis as you don’t announce a plan like this otherwise.
catclub
@ThatLeftTurnInABQ: “storm clouds in the desert where the water evaporates before it reaches the ground.”
The banksters are between the storm clouds and the ground(lings).
Linda Featheringill
@Svensker:
Ireland:
Ooh. That’s not good.
Mark D
Shorter Masters of the Universe:
I wonder what it’s like to live in a sane world in which people care about what’s best for the most, rather than what’s best for those with the most.
I bet the weather’s lovely …
Nemo_N
And when they finally get around to fix the unemployment situation, the Very Serious People will claim it was the austerity what fixed the economy.
fasteddie9318
@Nemo_N:
Fixed. And by “rectifies itself,” I mean once the peasants have accepted that 10-15% unemployment is “the new normal.” That’s the only “solution” to this crisis that our corporate overlords will permit.
Brian
Someone else put it this way:
“It’s like lending your dollars to someone in a far away land who uses his watch for collateral.
But he gets to keep wearing the watch, and he’s out of your legal jurisdiction.”
Ruckus
@fasteddie9318:
I’m glad you got it off your chest as well. Saved me the typing.
fasteddie9318
@Brian:
…and it doesn’t really matter because if he doesn’t pay, you’ll just get your government to cover the losses out of tax revenue.
Anoniminous
Read this.
and the ensuing discussion.
The Veil Has Been Lifted
..the average wage of a worker in the United States has been driven down to the global average of $12K per annum. Until then, Tax Cuts! (too keep profits up don’t cha know)
Just giving our globalized ‘free market’ economy a helping hand in the right direction.
Social outcast
“Hey- if more people had jobs, they’d be buying shit.”
I was reading an article on Yahoo from Forbes or one of the other business rags in which the author suggested that one way for the country to deal with less disposable income was to focus on simplifying their lives by buying less. “Food and a small place to sleep between work shifts is all you need” seemed to be the implication for our future financial health. (I would have included going to the library to read books in that short list, but no doubt the libraries will be the next socialistic institution that gets cut).
Duckest Fuckingway: Ask not for whom the Duck Fucks. . .
And yet no one will pay attention b/c John bigfooted his own post and/or because ‘econ r boringz’.
Caz
Lower individual taxes. Lower corporate tax rate. Less regulations. Smaller govt. Then you’ll see jobs being created and our country turning around. Keep up this massive spending, higher taxes, more regulations, bigger govt, and the country will continue to tank. Simple as that. That’s how capitalism works. It’s no secret, that’s how it worked for hundreds of years, and it works less and less as govt becomes more and more.
fasteddie9318
@Caz: Yeah, because the nineteenth century was a real golden age. Fuck off.
jnfr
@fasteddie9318:
I hope you don’t mind if I pass the link to your rant all around the entire Internet.
TenguPhule
Yeah, that Great Depression worked so well for us back then.
I have plan less stupid and more likely to work.
Round up the Cazs in America.
Employ them as indentured servants for $.10 an hour.
Profit!
Marginalized for stating documented facts
All too many people think this is just another recession, like the recessions prior to the year 2000 in America. Those recessions were almost all produced by the central bank increasing interest rates to choke off inflation. Aggregate demand collapsed, and in the wake of the recession, the central bank lowered interest rates and the economy took off like a rocket again with 7% GDP growth and tens of millions of new jobs created to make up for the shortfall until we got back to normal 6% unemployment and 4% inflation and a standard 3.5% annualized GDP growth rate.
That’s not what has happened to the American economy since 2000.
If you look at this chart, you’ll see that the net number of new jobs created in the upturn after each new recession since 1948 has dropped steadily, and in 2000 the net number of new jobs created that decade reached zero. Since 2000, the net number of new jobs created over the last decade has been negative, and now Americans have seen their net income drop in real inflation-adjusted dollars.
America is now a taxi meter running in reverse.
Everything is getting worse. People are getting poorer, our roads are falling apart, our cities are degenerating, our schools are collapsing, our universities are firing teachers and reducing the number of courses, our industries are offshoring millions of workers every year, and the middle class is dwindling away.
But of course that’s only for low-skill low-wage jobs, right? We don’t have to worry about people with college degrees or graduate degrees or high skills getting automated out of their jobs or offshored, right?
Wrong.
Source: Computerworld, 12 September 2011.
This has every prospect for producing better medical care than we currently get from doctors. Because doctors have this nasty habit of believing in treatments that don’t work.
Source: “Believing in treatments that don’t work,” Tara Parker-Hope, The New York Times, 2 April 2009.
Since doctors are human, they’re subject to kind of irrational thinking and cognitive biases Kahneman and Tversky identified in their Nobel-prize-winning research in psychology.
So computers are eventually going to take over from humans diagnosing illnesses — and they’ll do a better job than humans, because they’ll work from the evidence, not from irrational beliefs like “antibiotics should help and ear infection” which are disproved by the evidence, but which doctors continue to believe despite the evidence.
And this is in the process of happening with every high-skill educated graduate-degree-requiring profession right now.
The newspaper industry, the TV industry, the music industry, universities, doctors, accountants, graphic designers, engineers, technicians…all getting automated or offshored to the third world.
No, we’re not going to “sort of meander through the next decade,” this process of automating and offshoring is accelerating. America is going to undergo a demonic descent into a third world nation without a middle class as the vast majority of America’s high-skill high-wage jobs gets automated or offshored.
Source: “Europe: The Big Squeeze,” NEWSWEEK International Edition, 30 May 2010.
Harvard economist Umair Haque has been saying the same thing:
Source: “Market Correction? Try Perma-Crisis,” Umair Haque, Harvard Business Review, 5 August 2011.
Take a look at the cover story for the latest issue of The Atlantic magazine, “Can the middle class be saved?”
Source: “Can the Middle Class Be Saved?” Don Peck, The Atlantic magazine, September 2011, pp. 60-78
Ronzoni Rigatoni
“Hey- if more people had jobs, they’d be buying shit.”
Krugman’s point exactly. Demand demand demand. No munny, no demand. No demand, no production. No production, no jobs. John Maynard Keynes still lives even tho’ the PTB still insist he’s dead. Jeeze, what morans.The Randians are essentially killing their biggest market. Morans!
Ecks
@FlipYrWhig: Y’know how every time you try to spend money in a shop the cashier has to hold your dollar bills under a special light and make you sign an affidavit that you didn’t earn them working for the post office or state university, because if you did then YOUR GOVERNMENT JOB MONEY IS NOT REAL AND DOESN’T COUNT.
Thanks Tea Baggers, for your continued insights into what ails our economy.