Faithful readers know that we are fond of saying the financial debt crisis of 2008 is very much alive and it is clear for everyone to see that it had only been treated with a paper band-aid known as Quantitative Easing 1 and QE2.
Fast forward to today.
The debt escalating debt contagion stories coming out of Europe the past two weeks have been breath-taking.
It has forced the US Federal Reserve to step in again and bail out Europe's banks with unlimited access to US Dollars.
Here is the European Central Bank announcement:
- The Governing Council of the European Central Bank (ECB) has decided, in coordination with the Federal Reserve, the Bank of England, the Bank of Japan and the Swiss National Bank, to conduct three US dollar liquidity-providing operations with a maturity of approximately three months covering the end of the year. These operations will be conducted in addition to the ongoing weekly seven-day operations announced on 10 May 2010.
But as this story on Yahoo headlines "Dollar access no long-term fix for Europe's crisis but could buy time for banks"
The bottom line is that the US Federal Reserve - as it did in 2008 with $16 Trillion, just backstopped a massive loan to European banks to keep them solvent.
And the recession it triggered has not ended... it has only just begun.
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