• Steve H. Hanke
    05/04/2016 - 08:00
    Authored by Steve H. Hanke of The Johns Hopkins University. Follow him on Twitter @Steve_Hanke. A few weeks ago, the Monetary Authority of Singapore (MAS) sprang a surprise. It announced that a...

Former Fed VP Accuses Bernanke Of Bailing Out Europe Via Currency Swaps

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Wed, 12/28/2011 - 13:01 | 2016411 SwingForce
SwingForce's picture

It won't technically be a bailout until the ECB defaults on repayment...

Wed, 12/28/2011 - 13:07 | 2016433 Hard1
Hard1's picture

Would it be a bailout if the ECB defaulted had it not received the loans?

Wed, 12/28/2011 - 13:26 | 2016542 vast-dom
vast-dom's picture

Yet another ILLEGAL action by Bernank et. al. The only question that matters is WHEN WILL ANYONE BE CALLED OUT AND PROSECUTED? But alas, we all know the unfortunate answer to that.....outrageous really. 

Wed, 12/28/2011 - 13:41 | 2016571 BaBaBouy
BaBaBouy's picture

"Save The Beast... SAVE THE EURO"


Yes, Im sure thats The Top Priority on EVERY Americans Mind right now...

Wed, 12/28/2011 - 16:12 | 2017041 gmrpeabody
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Wed, 12/28/2011 - 16:16 | 2017053 gmrpeabody
gmrpeabody's picture

"It won't technically be a bailout until the ECB defaults on repayment..."

And with the FED agreeing the a 20% haircut, it can't actually be declared a default.

Wed, 12/28/2011 - 13:34 | 2016584 vast-dom
vast-dom's picture

And SILVER is getting raped today!!!!!!!!





Wed, 12/28/2011 - 14:02 | 2016658 alchemystic
alchemystic's picture

I'm asking is this just about people shredding their paper?

Wed, 12/28/2011 - 15:37 | 2016933 ebworthen
ebworthen's picture

No, it is the FED sending U.S. Taxpayer $'s to European banks using sleight of hand and terminology.

Let's say I give you $100 for 130 Euros and that is an even deal or fair exchange rate. 

Then, I say I'll give you $200 for 130 Euros ad infinitum. 

Well, I'm either lending you money or giving you money outright. 

You are "giving me money" or swapping it, but you make $70 everytime we do it. 

I tell my Wife I am doing a "currency swap to provide liquidity" and not losing money.  "Yeah right" she says.

Wed, 12/28/2011 - 15:43 | 2016961 Badabing
Badabing's picture

I'm asking is this just about people shredding their paper?

when you say people who do you imply?

"America's central bank, the Federal Reserve, is engaged in a bailout of
European banks.

when the WSJ spins a story the Federal Reserve implys the people or the US tax payer.

How hard will we have to work untill its easier to fight!

Wed, 12/28/2011 - 14:24 | 2016726 theMAXILOPEZpsycho
theMAXILOPEZpsycho's picture

Chill out, the bottom's not far away now

Wed, 12/28/2011 - 14:19 | 2016714 SheepDog-One
SheepDog-One's picture

'When will anyone be prosecuted'.

Likely never. this will end up with people hanging from street lamps.

Wed, 12/28/2011 - 19:01 | 2017449 CapitalistRock
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Unfortunately, it is not illegal. Depending on the judicial branch of government to protect the value of our fiat paper will ensure it all becomes toilet paper. People have no idea how much power congress gave to the federal reserve when it was created.

News flash: the fed can create all the money it wants and do with it as it pleases. Seriously. That's not a joke or exaggeration. There are no laws that protect the value of the dollars in your wallet.

Wed, 12/28/2011 - 21:10 | 2017801 Papasmurf
Papasmurf's picture

Like any other corporation, their obligation is to the shareholders.  The will manufacture the optimum amount of money to profit in the markets.  That is just shy of what will cause them to be legislated out of existance.

Wed, 12/28/2011 - 13:58 | 2016618 FinHits
FinHits's picture

SwingForce has a a good point. It does not sound very risky to Fed.

If I understand this correctly, Fed is doing secured lending: it giving $1 to ECB, receives as collateral €1 and then after 3 months or whatever, the $1 goes back to Fed and €1 back to ECB. What both do with their €1 and $1 is up to them.

ECB is easier: there is a line of banks wanting to borrow the $1 from ECB.

Fed is a bit harder, but I guess Fed could park its €1 to ECB account and earn a swanky 0.25% rate for it! ;-)

I am sure there is some sort of subsidy and possibly even open risk there, so that worry in the post is correct. What I don't understand is this: "The ECB, which guarantees to return the dollars at an exchange rate fixed at the time the original swap is made". Is this guarantee an option or forward trade fixed between ECB and FED utilising their marginal lending rates (which ones?).'

What happens with the currency movement risk if EUR-USD moves violently (sounds like Fed is covered but the other CB is not)? USD has since the arrangement strenghtened, so there could be a loss for ECB built in the trade? How will ECB cover this loss? 

Wed, 12/28/2011 - 14:00 | 2016656 blindfaith
blindfaith's picture

gosh...remember just a few short months ago how the euro and yuan were going to bury the dollar in trade settlements?  Where are the communist red Chinese big shots now and their talk-talk?  Let them buy the damn euro from the FED...after all they want out of our "lousy dollar" anyway.

Lets hope the FED has the inteligence to not exchange at par...that would cost us 30% plus.

Wed, 12/28/2011 - 14:02 | 2016659 IBelieveInMagic
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How will ECB cover this loss?

The same way, by borrowing some more. 

Wed, 12/28/2011 - 16:39 | 2017117 Iam_Silverman
Iam_Silverman's picture

"How will ECB cover this loss?

The same way, by borrowing some more."


Or by printing to devalue their currency to the point the swap is a wash.

Wed, 12/28/2011 - 14:03 | 2016660 NooooB
NooooB's picture

Would this not also equate to printing Eurodollars. Soaking up those extra Euros and thinning out the dollar at the same time? An effort to stabilize the EUR/USD perhaps? Markets aside, the inflationary effect would not be felt in the us right away I think?..

What happens when they raise the debt ceiling though I wonder....

Wed, 12/28/2011 - 14:38 | 2016779 RockyRacoon
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One must wonder where the Euros came from to "swap" to the Feds for dollars.   Could they be printing them?  Ya figger?   Where did the dollars come from to "swap" for the Euros.   Wonder what will happen when these "swaps" are settled?  Where will those Euros and Dollars end up?  Oh... so many questions.

Wed, 12/28/2011 - 15:57 | 2017000 FinHits
FinHits's picture

Good questions. 

I guess as of today, €1 would be given by ECB to FED in exchange for $1.295. Three months from now, ECB would simply return those $1.295 plus that +50 bps (?) interest to Fed, and Fed would return the €1. If the exchange rate were $1.100 instead, that might not matter to them, but Fed would "win" and ECB would "lose"? Would it matter? I am not sure.

I guess at that 3 month point, they could cancel these amounts? Return it to their shareholders (US Governemnt and National Central Banks of Eurozone, Japanese Government, UK Government, Canadian Government)? Keep them and invest them somewhere?

Wed, 12/28/2011 - 16:10 | 2017038 optimator
optimator's picture

Not "From", but "Too" would answer your question.

Wed, 12/28/2011 - 13:06 | 2016434 AngryGerman
AngryGerman's picture

Vielen Dank für das Geld, meine Amerikanischen Freunde!

Wed, 12/28/2011 - 13:09 | 2016449 GeneMarchbanks
GeneMarchbanks's picture

Bolded German is scary.

Wed, 12/28/2011 - 13:14 | 2016483 GOSPLAN HERO
GOSPLAN HERO's picture

Being cussed-out in German is worse.

Wed, 12/28/2011 - 13:23 | 2016515 BaBaBouy
BaBaBouy's picture

IMO the ENTIRE Financial System has been Hyjacked and Corrupted.


Nothing can be believed anymore.

All the purported "Money" out there is mostlly 1's and 0's in some select Banks' Hard-drives.

(IE. it's not even physical Paper Money)


So its a Banksters' Giant Computer game, played by the worlds elites.


We are headed into a Giant Financial SHIT STORM!

Wed, 12/28/2011 - 13:43 | 2016611 BalanceOrBust
BalanceOrBust's picture

You are right.  It has been hijacked by those who have access to unlimited capital.  It is like playing roulette and continuously doubling down on winning bets.  This is a losing strategy for mortals.  But for banks that have unlimited access to bailouts and fresh money, it is a strategy that can win.


Corruption -- through and through.

Wed, 12/28/2011 - 13:51 | 2016634 BaBaBouy
BaBaBouy's picture



And this is how they are controlling GOLD.

Imagine, unlimmited Electronic Dollars to short Paper GOLD.


IMO the Real Value of GOLD right now is probably North of $25K.

The current CORRUPTION will not last forever...

Wed, 12/28/2011 - 17:18 | 2017219 economics1996
economics1996's picture

The politicians and bankers believed their own Keynesian crap.  When you believe in fairy tales bad shit happens.

Wed, 12/28/2011 - 13:54 | 2016621 Momauguin Joe
Momauguin Joe's picture

This clown Bernanke only answers to his bosses, his REAL bosses: The eight families that OWN the Federal Reserve:

"  They are the Goldman Sachs, Rockefellers, Lehmans and Kuhn Loebs of New York; the Rothschilds of Paris and London; the Warburgs of Hamburg; the Lazards of Paris; and the Israel Moses Seifs of Rome. "

Their interests in Europe and elsewhere must be protected at all costs. They pull the stings on all things financial. They are the squid.



Wed, 12/28/2011 - 14:16 | 2016698 Ying-Yang
Ying-Yang's picture

Thanks for the names. Zh needs to put the family members on its no fly list!

Wed, 12/28/2011 - 14:19 | 2016706 Ying-Yang
Ying-Yang's picture

ZHA can patdown a Rothschilds or two. Even nude scans of Rockefellers... (uuuuugly)

Thu, 12/29/2011 - 01:31 | 2018314 JPM Hater001
JPM Hater001's picture

Pretty sure these families avoid commercial airlines...I mean they own some but it's only so you won't travel with them.

Thu, 12/29/2011 - 00:44 | 2018243 YesWeKahn
YesWeKahn's picture

Don't talk about those, they would silence you for good.

Wed, 12/28/2011 - 13:19 | 2016502 wandstrasse
wandstrasse's picture

Seien Sie beruhigt, wir können Bens Geld genauso gut verbrennen wie Ihr Amerikaner!

Wed, 12/28/2011 - 13:25 | 2016535 Irelevant
Irelevant's picture

Arbeit macht frei ... They just need to translate it into greek and italian.

Wed, 12/28/2011 - 13:32 | 2016575 Yikes
Yikes's picture

Your welcome.  You will pay us back, won't you?

Wed, 12/28/2011 - 14:13 | 2016686 Ray Elliott
Ray Elliott's picture

Nichts zu danken.

Wed, 12/28/2011 - 16:14 | 2017048 optimator
optimator's picture

In your language:  beschissen

Wed, 12/28/2011 - 14:45 | 2016798 jdelano
jdelano's picture

It's worth repeating though I'm sure most everyone here knows it--the FED did bail out Year Up.  Those swaps, when implemented create new dollars (debt) at absurdly low rates.  What merits consideration at this point is Gold.  Everyone knows it should be continuing to skyrocket.  The fact that it is not means that CBS/TPTB are very adept at manipulating gold prices.  That means there really is nowhere to hide.  I'll keep my gold, but the evidence tells me it won't matter in the least.  It will not be allowed to appreciate wildly--or that is, appropriately, and if it does, it will be confiscated like it was last time around.  I think ZH, aka the Tylers, should spend a little more time thinking about the proability that gold will never be allowed to act as a true store of value.  Personally, I'm doing some hard thinking about oil and arable land.  

Wed, 12/28/2011 - 13:02 | 2016414 SHEEPFUKKER

Who will Bernanke accuse of f'ing this whole thing up after he becomes the former chairman?

Wed, 12/28/2011 - 13:07 | 2016439 GeneMarchbanks
GeneMarchbanks's picture

I believe you're looking for the person who'll be in charge then. Probably Ron Paul.

Wed, 12/28/2011 - 14:31 | 2016751 CORNGUY
CORNGUY's picture


Wed, 12/28/2011 - 13:02 | 2016415 Snakeeyes
Snakeeyes's picture

I testified in the House of Representatives a couple of weeks ago saying the same thing.




Wed, 12/28/2011 - 13:15 | 2016487 JPM Hater001
JPM Hater001's picture

Good man.  Press on soldier the war is only just starting.

Wed, 12/28/2011 - 14:46 | 2016799 Things that go bump
Things that go bump's picture

Were they unsuprised?

Wed, 12/28/2011 - 13:03 | 2016417 Mercury
Mercury's picture

If we don't bail out Europe the terrorists will have already won. Duh.

Wed, 12/28/2011 - 13:08 | 2016443 hedgeless_horseman
hedgeless_horseman's picture



So it is a win-win for, "terrorists."

Wed, 12/28/2011 - 13:10 | 2016453 GeneMarchbanks
GeneMarchbanks's picture


If you can, please fix that.

Wed, 12/28/2011 - 13:03 | 2016418 Pladizow
Pladizow's picture

America is the frog in an increasingly warm pot of water, with Bernake at the dial!

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