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Tuesday, January 11, 2011

Ultimately America bails out the World...

America is the most singularly dominant force in global finance.  Its tentacles are in every nation and when those countries' finances are on the brink, US government and fiscal policy is to come to the rescue overtly or covertly depending on the situation..  Today's example...

Portugal-- the next domino to fall into crisis mode the European Union.  Like Ireland, it is publicly denying it needs a bailout and is telling the world 'all is well' though its finances tell a much different story.


From Reuters, 1/10/11-- "The European Central Bank threw Portugal a temporary lifeline on Monday by buying up its bonds, traders said, as market and peer pressure mounted for Lisbon to seek an international bailout soon.  A senior euro zone source told Reuters on Sunday that Germany, France and other euro zone countries were pushing Portugal to seek an EU-IMF assistance program, following Greece and Ireland, in a bid to prevent contagion spreading to much larger Spain, the fourth biggest economy in the zone."

 OK, seems straight forward..  Question time...

Q:  The ECB "threw Portugal a temporary lifeline".. Where did this money come from?

A:  The US Federal Reserve of course.. i.e. American taxpayers..

From NY Times.. Fed Intervenes in European Debt Crisis (5/10/10) -- "The Federal Reserve announced that it would open currency swap lines with the European Central Bank — in essence, printing dollars and exchanging them for euros to provide some liquidity for European money markets and banks"

Q:  If Portugal does take International Monetary Fund (IMF) loans and the austerity which comes with it, like Ireland and Greece, where does the IMF get its money from?

A: The IMF consists of 186 UN nations and Kosovo.. each nation contributes to the Fund and has a weighted vote in policy matters based on the quota it contributes.  The US contributes 17.09% of the total IMF budget. Japan is 2nd with 6.12%..   The US also holds 16.74% of the total vote.  Major decisions require an 85% supermajority.  The United States has always been the only country able to block a supermajority on its own.

US contribution really means US taxpayer contribution.. So if for example the IMF loans a nation $100 billion dollars, that means obviously that US taxpayers lent $17.09 billion.

It is important that American readers truly understand the big picture...

 It has been 28 months since Lehman Bros. fell, starting the Panic of 2008 and ongoing global recession.  14 Trillion US dollars have been spent thus far to bail out banks, the auto industry while they open factories in other parts of the world, hedge funds, credit card companies and financials such as Goldman Sachs and AIG.  The Fed has also spent an additional 14 trillion around late 2008 into early '09 bailing out European and Asian banks, and American corporations such as McDonalds, Verizon and GE.

While there is a valid argument to helping the global community since everything is so interconnected and what affects one, affects others, the single-minded focus of the US government to helping anyone and everyone but its own people is both offensive and domestically destructive.

The US continues to assist financial and banking entities across the globe with US taxpayer dollars and Yet, as A&G previously posted, the Fed will not assist US states and municipalities which ultimately will affect Americans living in those areas in drastic ways when the governments begin defaulting.  They will not spend a penny to help small business.."main street", the middle class, the poor...Zero.

So while its all 'nice' that Holiday shopping was Up and know-nothing economists are 'optimistic', when all is said and done, the reason why things are not better for most people 28mths later is because the government focus and Treasury & Fed spending is targeted to banking interests, the stock markets and other nations.. everything but you.

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