Ron Paul: Stop the Fed’s Covert Bailout of Europe

by Ron Paul

This week, my congressional committee will hold a hearing to examine how the Federal Reserve bails out European banks, propping up spendthrift European governments in the process. Unfortunately this bailout comes at the expense of American citizens, in the form of higher prices and diminished savings down the road.

A good analysis of the Fed’s “swap” scheme first appeared in the Wall Street Journal back in December, in an article by Gerald O’Driscoll entitled, “The Federal Reserve’s Covert Bailout of Europe.” Essentially, beginning late last year the Fed provided U.S. dollars to the European Central Bank in exchange for Euros– sometimes as much as $100 billion at a time. The ECB then funneled those dollars to European banks to provide liquidity and prevent crises from bank insolvencies. Since the currency swap was not technically a loan, the Fed did not have to embarrass itself by openly showing foreign bank debt on its balance sheet. The ECB meanwhile did not have to print new Euros and expose the true fragility of big European banks.

The entire purpose of this unholy arrangement was to obscure the truth: namely that the Fed was bailing out Europe with U.S. dollars.

But why is it the business of the Federal Reserve to bail out European banks that find themselves short of dollars to pay their dollar-denominated contracts? After all, those

contracts often were hedges taken to protect banks against weakness of the Euro. Hedges are supposed to reduce risk, but banks that miscalculate should suffer their own losses accordingly. It’s not our business if the ECB chooses to create moral hazards by providing liquidity to European banks, but why should the Fed prop up Europe’s bad decisions!

The Fed has promised to provide unlimited amounts of dollars to the ECB, should circumstances require it. It boggles the mind. Of course when Fed officials first entered into these swap agreements with the ECB last September, they did so quietly. The American public only found out via websites of the ECB, the Bank of England, or the Swiss Central Bank.

The Fed already has pumped trillions of dollars into the economy since 2008, and US banks currently hold $1.5 trillion of excess reserves. So why don’t American banks lend those excess trillions to European banks if they really need dollars? If US banks could earn 1 or 2 percent on those loans, they might just be interested. But they can’t compete with the ½ percent interest rate charged by the Fed to the ECB. That’s one glaring example of the harm caused by the Fed’s ability to create money and loan it at below-market interest rates.

The Fed argues that these loans will be temporary, merely providing a little boost to get Europe over the hump. But that’s what they thought a few years ago when such lines of credit to the ECB were set to expire, only to see the Fed reauthorize them. What happens if the European financial system collapses? Will the Fed be left holding a bunch of worthless Euros? Will the ECB simply shrug and turn over the collateral it received from European banks, maybe in the form of bonds from Ireland, Italy, or Greece? Have the 17 individual central banks backing the ECB pledged their gold holdings as collateral?

The Fed has placed a hundred-billion dollar bet on the future of the Euro, with the strength of the dollar on the line. This is absolutely irresponsible, and directly contrary to market discipline. Let private banks, European or otherwise, take their own risks. Let foreign central banks inflate their own currencies and suffer the consequences. In other words, it’s time to apply market principles to banks and money.

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176 Comments:

  1. STFU dumb ass Ron Paul stooge. Go back to your little New Hampshire

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  2. Go back to school you grammatical dunce.

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  3. How can Paul make such a bogus assumptions …. no wonder he got so thoroughly rejected by GOP Primary voters. He should have his examined.

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  4. That is a good point but im just tired of talking about it because he isnt gunna win. The people that run this country will not allow some1 to change what they have been planning for years. The U.S. economy is gunna collapse and one man cant do anything about it.

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  5. Unless Ron Paul wins — the below is a Final Blow to FREEDOM!

    NDAA — how it affects YOU, the US Citizen!

    Prior to this 2012 infamy — BO signing the NDAA — no US military force could be Constitutionally used to WAGE WAR against US Citizens within the USA!
    The reason Clinton used in 1993 in Waco, TX — the FBI, BATF, SWAT to kill men (who may have broken the Law), and also kill and burn to death innocent women and children, that had different religious beliefs — NOT the US Military, which only stood by and did not participate.

    Now, BO, has the POWER to determine that ANY US CITIZEN disagreeing in a “confrontational manner” is a TERRORIST! So, go ahead and start A Peaceful Revolution — your exercise of FREEDOM of Speech may be deemed “Detrimental to National Security”, and thus your actions termed as those of Terrorists, to be crushed by the greatest Military Power on Earth — OUR OWN ARMED FORCES — obeying the dictates of the Commander-In-Chief (our current and FUTURE occupier of the White House)!

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  6. Makes sense, from article:

    “The Fed already has pumped trillions of dollars into the economy since 2008, and US banks currently hold $1.5 trillion of excess reserves. So why don’t American banks lend those excess trillions to European banks if they really need dollars? If US banks could earn 1 or 2 percent on those loans, they might just be interested. But they can’t compete with the ½ percent interest rate charged by the Fed to the ECB. That’s one glaring example of the harm caused by the Fed’s ability to create money and loan it at below-market interest rates.”

    Our justice system is completely gone. I know this because I’m a mother, and have been snared in it by virtue of choosing life over marriage (a physically necessary choice in our case) and resumed working for nonprofits and contributing to local community in a balanced way, and didn’t eradicate Dad from the family. First time he was actually REQUIRED to work (or not eat) in the marriage, and no slapping the wife around either.

    It took approximately 15 minutes in family court to undo that strategic chink in the door I’d gained, but years to literally get to the point of kidnapping my children overnight; and by this time so many vultures were in the mix no wonder it didn’t happen sooner. As there was, literally, no “peace” in this neighborhood unless I bowed to the wrong “gods,” I made it my business in the last few years (inbetween acquiring more survival skills) to help let some of the locals lose a little sleep in this (legal) manner: I blogged who was paying whom through which nonprofit front group, as well as exposed the fundamentalist/Unification Church agenda working its way through the HHS system. Turns out we all need indoctrination education in how to raise our kids, at taxpayer expenses, this is in ADDITION to the wonderful public schools where kids learn to bully or be bullied (etc.).

    Ron Paul was the only candidate who even looked halfway askance at public education. I’m not 100% on his page but have no question there isn’t another halfway reasonable candidate.

    Following the threads, it becomes VERY clear that the income tax +Federal Reserve have created an artificial caste system in the US (a sort of “nobility”) that means individuals who do not incorporate — profit or nonprofit — don’t really stand much of a chance. The child support system is $4 billion a year, and almost put our household homeless. The war on innocents (including independent single mothers) definitely not MSM.

    These courts are an “archipelago” and a resident danger to due process, and freedom. Feminism is not. Collectivism IS. See Norman Dodd transcripts, Council on Tax-exempt foundations, Reece Commission etc. This is the real thing, and stronger than ever decades later.

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  7. Ron Paul is the people. It’s their voice. If Obama can declare invasion into another country without congress, than i’m sure Ron Paul can do something just as major.

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  8. I see all those petitions being directed at Ron Paul supporters as scams used to collect emails and subvert the campaign.

    I didn’t even sign any, and I get insulting and misleading emails in my junk folder claiming to be part of the campaign.

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  9. what are you fucking retarded or something?

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  10. French Canadian,
    Yes, that is the interview I watched with Aaron Russo. I sent this to my neighbor who grew up in the Bronx and is Puerto Rican because I think he can relate to this guy. He considers himself very educated and is very skeptical, so if we can wake him up, there is hope for others. He also has a huge social network and a radio show. He is a retired history/Spanish teacher, so we are sharing credible information about 9/11 and the New World Order agenda-from the ground floor. Most people don’t think it’s possible to do what they did and keep it so secretive. Mistakes have been made, so you have to find those as well as understanding how sophisticated and organized the intelligence community is as well as the powerful elite who are pushing this agenda forward. I’m trying to understand how the pyramid scheme works and the hierarchy. If you have any good videos on this, please share. I just listened to a documentary that says there are many factions-different levels of knowing the ultimate plan and that they are not all working together. Need to research this further. I also told him to go to the Architects and Engineers for 9/11 Truth for the science part of it.

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  11. lol, I went to sign the petition for Ron Paul and it says they have 25,220 votes out of 35,000… I think they may have upped the votes needed…

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  12. Connatiah1. Obama romney and bush are all owned by Goldman Sachs.. look it up..

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  13. You dont like poor children? UN? Fuck the UN. Re-search! Thanks for catering to my problem fag! “KID” JOINTS! No you give me some brain ho! That man is one of if not Thee anit-Christ, so while your playing word games with rich people, I’m singing a song of the gospel of peace. And by the way ask DR doolittle why he doesnt lead the charge in setting up a new government instead of sitting in his lofty life pointing fingers!

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  14. Unless Ron Paul wins, here is a likely scenario:

    1) Mitt Romney steals the nomination.
    2) Obama crushes This Flippy-Floppidy GOP Marionette and gets reelected.
    3) More Laws get quickly passed, where citizens can’t even sneeze without permission.
    4) BO uses the US Military (per Law he passed) to shoot all US Citizens who dared sneeze in the wrong direction.
    5) Money gets printed on one side of the note only — to save ink (ala 1919 Germany).
    6) The People are forced to parade monthly in front of the White House, chanting: “We can do without the Sun, but not without Obama”; “We can do without Air, but not without Obama” (ala 1950′s Stalin parades).

    Hey, is it time for us to start practicing these chants…if we want to be fed.

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    • You’re right. Unless they are exposed and arrested for their war crimes and participation and cover up of 911, then we’re all done for. They murdered American citizens and then blamed innocent people for the crime. What scum run this place. There’s has to be a big big change, trials, and executions of the real terrorists.

      The Truth is:

      Everyone, and I mean “Everyone” I speak to now is voting for Ron Paul. The other candidates are “ALL” very creepy with deep deep closets. It makes no difference if you are a republi-can’t or a demma-don’t, this election is going to be a real embarrassment to the vote thieves, and media whores, and the little men behind the curtain. This is going to be shaping up to become a real revolution with a lot of time left to go for more exposure of the psychopathic zionist criminals.

      Dr. Ron Paul, the only man running for President.

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      • The problem is that many educated people can’t believe that there is a well-organized and hierarchical movement that has been orchestrated for years. That anyone could mastermind such a plan and not have it exposed. We are providing a neighbor friend who considers himself to be very well-read, aware and educated about 9/11 and the New World Order Agenda. He gets his information from the mainstream. He believes it’s just a few people in the military industrial complex, Wallstreet and corporations. He has a radio show and a large social network, so we are hoping if we can wake him up, he will do the same. Just watched some interviews with Aaron Russo that my husband told me about. Worthy of your time if you haven’t seen them. Remember when the BBC by accident said that the WTC was coming down 20 minutes before it happened. Now, how did they know that-ESP? They planned 9/11 very carefully but you can also find where they tripped up. All you have to do is look at the science and why so many architects, engineers, chemists, physicists have questioned the official story. They are true heroes and patriots by risking their careers to ask the kinds of questions most people are too afraid to ask.
        Architects and Engineers for 9/11 truth. This is for the skeptics out there who have a scientific mind. WTC building completely disintegrated-dust. Now, can a plane or fire do that?

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  15. why are Americians not looking at the bigger picture the fed is doing damage to the US every place it works wither they are dealing in finance, drug dealing, dealing with arming criminals soon running fema camps buying YOU fema coffins fema trains with shackles wake up people VOTE RON PAUL at least he talks about change the rest want to f–k you without kissing you, best of luck all the way from Scotland UK

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  16. you’re right i shouldn’t but that asshole is going to vote.

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  17. Robin,

    Of course I know Aaron Russo. You can listen to a great interview with him on the Alex Jones Show on December 2011:

    Alex Jones – Reflections & Warnings: An Interview with Aaron Russo
    http://www.youtube.com/watch?v=875471qyR_o

    And yes, I did watched Ben Swann’s Reality Check. I am not back blogging on this site. But I decided to post new articles and videos that I find on Ron Paul. This will be my ONLY participation.

    Good job Robin, keep talking to as many people as possible… this is the only way to go.
    One person at a time. If everybody would do this, the whole country would vote for Ron Paul. God bless!

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  18. I dont get why people get so confrontational just because some1 states their own view. U completely contradict urself u bring up video games because that is all u can think about while saying im living in a gaming scenario lol. Unless Ron is Jesus then nothing major will change and in a couple years all u sheeple r gunna be wishing u did something better than worship Ron Paul.

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  19. what planet are you from?

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  20. Hello French Canadian. You are back…Have you watched Ben Swann’s Reality Check yet? Have you seen the videos by Aaron Russo? My husband just told me about him. Look him up if you don’t know about him. We got all our family on board voting for Ron Paul. All these years talking about 9/11, and the New World Order has had an impact. Working on a letter to the editor about Ron Paul’s position on foreign policy. My husband will be taking the main candidates=Santorum and Romney, and comparing them to Ron Paul. We are all going to write letters until our primary is over. We have paper ballots we send in. I’m talking to as many people as possible. I’m on a mission. My husband is working on a pamphlet with a retired economics professor about Ron Paul’s position on the economy. I’m hoping to be educated soon.

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