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Forum Post: Former Fed VP Accuses Bernanke Of Bailing Out Europe Via Currency Swaps /// Will The Federal Reserve Devalue Dollar by 40% as Ben Bernanke Promised in 2002?

Posted 12 years ago on Dec. 28, 2011, 12:58 p.m. EST by MonetizingDiscontent (1257)
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Federal Reserve Secretly Bailing Out Europe

(((CNBC Video))) http://www.youtube.com/watch?feature=player_embedded&v=_u8tFqOIarc

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



First it was Zero Hedge... http://www.zerohedge.com/news/foreign-currency-liquidity-swaps-aka-global-bail-out-plan-b-faqs ...Now it is the turn of a former Dallas Fed Vice President, Gerald ODriscoll, to outright accuse the Fed of bailing out Europe courtesy of "incomprehensible" currency swaps, and implicitly accusing Bernanke of lying that he would not bail out Europe even as he has done precisely that. And not only that: by cutting the USD swap spread from OIS+100 to OIS+50, the Fed has made sure it gets paid less than ever for extended Europe the courtesy of bailing it out all over again.

Incidentally, O'Driscoll says,

"America's central bank, the Federal Reserve, is engaged in a bailout of European banks. Surprisingly, its operation is largely unnoticed here."

One thing we can say proudly - it has been noticed loud and clear here:

The Federal Reserve's Covert Bailout of Europe

When is a loan between central banks not a loan? When it is a dollars-for-euros currency swap.

From the WallStreetJournal: http://online.wsj.com/article/SB10001424052970204464404577118682763082876.html?_nocache=1325091067684&user=welcome&mg=id-wsj
-DECEMBER 28, 2011-

America's central bank, the Federal Reserve, is engaged in a bailout of European banks. Surprisingly, its operation is largely unnoticed here.

The Fed is using what is termed a "temporary U.S. dollar liquidity swap arrangement" with the European Central Bank (ECB). There are similar arrangements with the central banks of Canada, England, Switzerland and Japan. Simply put, the Fed trades or "swaps" dollars for euros. The Fed is compensated by payment of an interest rate (currently 50 basis points, or one-half of 1%) above the overnight index swap rate. The ECB, which guarantees to return the dollars at an exchange rate fixed at the time the original swap is made, then lends the dollars to European banks of its choosing.

Why are the Fed and the ECB doing this? The Fed could, after all, lend directly to U.S. branches of foreign banks. It did a great deal of lending to foreign banks under various special credit facilities in the aftermath of Lehman's collapse in the fall of 2008. Or, the ECB could lend euros to banks and they could purchase dollars in foreign-exchange markets. The world is, after all, awash in dollars.

The two central banks are engaging in this roundabout procedure because each needs a fig leaf. The Fed was embarrassed by the revelations of its prior largess with foreign banks. It does not want the debt of foreign banks on its books. A currency swap with the ECB is not technically a loan.

The ECB is entangled in an even bigger legal and political mess. What the heads of many European governments want is for the ECB to bail them out. The central bank and some European governments say that it cannot constitutionally do that. The ECB would also prefer not to create boatloads of new euros, since it wants to keep its reputation as an inflation-fighter intact. To mitigate its euro lending, it borrows dollars to lend them to its banks. That keeps the supply of new euros down. This lending replaces dollar funding from U.S. banks and money-market institutions that are curtailing their lending to European banks—which need the dollars to finance trade, among other activities. Meanwhile, European governments pressure the banks to purchase still more sovereign debt.

This Byzantine financial arrangement could hardly be better designed to confuse observers, and it has largely succeeded on this side of the Atlantic, where press coverage has been light. Reporting in Europe is on the mark. On Dec. 21 the Frankfurter Allgemeine Zeitung noted on its website that European banks took three-month credits worth $33 billion, which was financed by a swap between the ECB and the Fed. When it first came out in 2009 that the Greek government was much more heavily indebted than previously known, currency swaps reportedly arranged by Goldman Sachs were one subterfuge employed to hide its debts.

The Fed had more than $600 billion of currency swaps on its books in the fall of 2008. Those draws were largely paid down by January 2010. As recently as a few weeks ago, the amount under the swap renewal agreement announced last summer was $2.4 billion. For the week ending Dec. 14, however, the amount jumped to $54 billion. For the week ending Dec. 21, the total went up by a little more than $8 billion. The aforementioned $33 billion three-month loan was not picked up because it was only booked by the ECB on Dec. 22, falling outside the Fed's reporting week. Notably, the Bank of Japan drew almost $5 billion in the most recent week. Could a bailout of Japanese banks be afoot? (All data come from the Federal Reserve Board H.4.1. release, the New York Fed's Swap Operations report, and the ECB website.)

Will The Federal Reserve Devalue Dollar by 40% as Ben Bernanke Promised in 2002?

Remarks by Governor Ben S. Bernanke Before the National Economists Club, Washington, D.C.

Deflation: Making Sure "It" Doesn't Happen Here


-November 21, 2002-
In this 2002 speech by --then-- Federal Reserve Board Governor Ben Bernanke is saying that If he ever faced another Great Depression, he would do 5 things... and he has done everything he said he would do so far, now that he is at the helm, as Chairman! Accept for one final thing....
  • Interest rates to zero (CHECK)
  • Buy securities to expand the feds balance sheet (CHECK)
  • Increase the money supply (CHECK)
  • Buy the countries debt, QE1 QE2 etc etc... (CHECK)

And the only thing left that Ben promised to do, that he hasn't done yet...

  • Devalue the Dollar by 40%

Ben Bernanke 2002: "Although a policy of intervening to affect the exchange value of the dollar is nowhere on the horizon today (2002), it's worth noting that there have been times when exchange rate policy has been an effective weapon against deflation. A striking example from U.S. history is Franklin Roosevelt's 40 percent devaluation of the dollar against gold in 1933-34, enforced by a program of gold purchases and domestic money creation. The devaluation and the rapid increase in money supply it permitted ended the U.S. deflation remarkably quickly. Indeed, consumer price inflation in the United States, year on year, went from -10.3 percent in 1932 to -5.1 percent in 1933 to 3.4 percent in 1934.17 The economy grew strongly, and by the way, 1934 was one of the best years of the century for the stock market. If nothing else, the episode illustrates that monetary actions can have powerful effects on the economy, even when the nominal interest rate is at or near zero, as was the case at the time of Roosevelt's devaluation."

This speech is of utmost importance, people need to take some time to read it. A 40% devaluation will come in some form of Quantitative Easing. http://www.federalreserve.gov/boarddocs/speeches/2002/20021121/default.htm



Read the Rules
[-] 1 points by MonetizingDiscontent (1257) 12 years ago

::::::::A Movement By The People To Prevent The Reappointment Of The Fed Chairman::::::::

::::::::::::::::::::::::::::Bernanke's Failed CNBC Predictions Caught On Tape::::::::::::::::::::::::::::


-Jan 2, 2012-

Spliced video from 5 CNBC appearances from 2005-07 where Bernanke demonstrates that he knows absolutely nothing. This one is so good we need it to go viral. Please send it to your reps in Congress and to the White House.

WASHINGTON CONTACT INFO for everyone & everything is HERE. http://dailybail.com/contact-washington/

If we can get a million voters to see the clip, and from that group, 100,000 or so to actually email the video to someone in Washington, we might just be able to make enough noise to send B-52 back to Princeton. At a minimum we will make his life miserable and cause him extreme distress as this video passes through a million households and his utter lack of competence is seen by so many. If nothing else, think of it as a few minutes of your time for karmic revenge. Thank you!

  • There is no excuse or precedent for the Chairman of the Federal Reserve to misunderstand, miscalculate and misrepresent the greatest debt bubble of the last 200 years so tragically. Thousands saw it coming, but Greenspan & Bernanke were completely and utterly disconnected from reality.

  • Bernanke actually said that lending standards were circumspect and safe, or something to that effect, and that regulators were closely monitoring the quality of loans made by banks. I will pause while you get off the floor from laughing.

  • Every time he opens his mouth in this clip, he's not just wrong, but insufferably so. His credibility is non-existent.

  • Chairman Bernanke, there is no excuse. Admit your failure. We the people ask for demand your resignation.

  • Post To Your Facebook Profile http://www.facebook.com/login.php

  • Thank you!

::::::::Obama Sends Request To Congress For $1.2 Trillion Debt Ceiling Increase::::::::




Two days ago we wondered how long it would take for Obama to restart the debt ceiling theater. Not that long it turns out.



From Bloomberg:

President Barack Obama formally notified Congress today that that the government needs more borrowing authority.

The written certification to raise the debt ceiling to $16.394 trillion starts a 15-day clock for Congress to consider and vote on a joint resolution disapproving of the increase.

Under legislation passed Aug. 2 after months of wrangling between the administration and Republican lawmakers, the president is given the power to veto any disapproval resolution that clears both chambers of Congress.

The law calls for Obama to notify Congress when the debt came within $100 billion of the current $15.194 trillion limit.

While the threshold was reached Dec. 30, when the president was in Hawaii and Congress was on holiday break, Obama agreed to a request from congressional leaders to delay the notification request, ensuring the deadline for congressional action didn’t lapse before lawmakers returned to Washington.

(((View this article Here))) http://www.zerohedge.com/news/obama-sends-request-congress-12-trillion-debt-ceiling-increase

[-] 1 points by MonetizingDiscontent (1257) 12 years ago

::::::::::::::::::: Fed Secretly Bailing Out Europe:::::::::::::::::::

(((CNBC Video))) http://www.youtube.com/watch?feature=player_embedded&v=_u8tFqOIarc

[-] 1 points by nachosrulz (63) from Eureka, CA 12 years ago

The central bank is an institution of the most deadly hostility existing against the Principles and form of our Constitution. I am an Enemy to all banks discounting bills or notes for anything but Coin. If the American People allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the People of all their Property until their Children will wake up homeless on the continent their Fathers conquered. ---Tomas Jefferson copy n paste this so it gets out

[-] 1 points by MonetizingDiscontent (1257) 12 years ago

QE3 is on… (But they’ll call it, “Nominal GDP Targeting”) Is the market starting to comprehend that the non-QE of the ECB’s LTRO and SMP is in fact QE and implies the currency wars just went to 11 – forcing the Fed’s hand?

::::::::::::Is Today's Market Pricing A Forthcoming Reactionary-QE By The Fed?::::::::::::



Our earlier discussion... http://www.zerohedge.com/news/next-steps-euro ...of the relationship between ECB and Fed balance sheets as the driver of risk correlations this year seems particularly timely as we are seeing quite notable divergences among US asset classes and FX flows today. EUR is now up relative to the USD on the day (DXY is down and tracking stocks higher), Treasury yields are falling fast and the curve flattening (2s10s30s dropping rapidly) and Silver is rallying hard off its lows (Gold perhaps being held back for now by collateral/cash/redemption calls for now). Oil is back green for the week also.

Is the market starting to comprehend that the non-QE of the ECB's LTRO and SMP is in fact QE and implies the currency wars just went to 11 - forcing the Fed's hand?

::::::::::::::::Dollar (inverted) vs S&P 500 vs 10Y Yields::::::::::::::::


:::::Commodities are starting to surge again. Even Gold is now on the move too:::::


(((View this article Here))) http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2011/12/20111229_comms3.png

[-] 1 points by Nevada1 (5843) 12 years ago

Hi Monetizing, Thank you for another great post. Best Regards, Nevada

[-] 0 points by mee44 (71) 12 years ago

Look at that alphabet soup of FED lending, guarantee and purchase programs.....





various swap lines

a temporary guarantee for money market funds

various supplemental financing programs



Maiden Lane

Maiden Lane II

Maiden Lane III


direct purchases of MBS from the GSEs

allowing various investment banks to become "bank holding companies"

reciprocal currency agreements



QE Lite


[-] 1 points by MonetizingDiscontent (1257) 12 years ago

I'm going to have fun googling a few of these. Thanks for the list!

[-] 0 points by NewEnglandPatriot (916) from Dartmouth, MA 12 years ago

QE3 and euro bailout will lead to devaluing the dollar by 40%.

"First castle has fallen...Candle is burning out....Only the Illuminated ones will know the last secret."


[-] 0 points by NewEnglandPatriot (916) from Dartmouth, MA 12 years ago

George, do you post anymore?
Most people will not follow the links if you don't comment...

[-] 0 points by NewEnglandPatriot (916) from Dartmouth, MA 12 years ago

This was all planned in2002, when Bernake was selected to be future chairman.

His speech, read between the lines November 21,2002.


[-] 1 points by MonetizingDiscontent (1257) 12 years ago

~wOw~ I was just posting that very thing on another thread! Synchronicity!!



[-] 0 points by NewEnglandPatriot (916) from Dartmouth, MA 12 years ago

That is usually a sign of truth...This has happened to me while posting someone posted just before almost exactly the same

Back to topic, devaluation of currency via QE is going to lead to a convergence of hyperinflation of cost/devaluation of dollar and economy is toast.

[-] 1 points by MonetizingDiscontent (1257) 12 years ago

Not going to be pretty at all. Markets/Prices are SUPPOSED to rise, yes... but their supposed to fall too (in a free market)

Even I cannot believe they are actually going to kill the dollar just to keep shareholders stock-prices up, of these -too big to fails-

[-] 0 points by NewEnglandPatriot (916) from Dartmouth, MA 12 years ago

It was the plan all along, right before our eyes. I was telling people about what happened now 10 years ago, and everyone kept saying "It will never happen"

[-] 1 points by MonetizingDiscontent (1257) 12 years ago

"It Wont Ever Happen" ...yeah I can hardly stomach hearing that kind of assumption any more, these days...

10 years is quite a call, I wish I would've been on the receiving end of your admonishes... (because I wasn't paying attention to monetary policy back then) ...10 years would have been ample time to save up for these worsening times ahead ...Well, better late than never though, I suppose...

[-] 0 points by NewEnglandPatriot (916) from Dartmouth, MA 12 years ago

I got my 401k into a fixed account, and cashed out my life insurance, and many CDs, IRAs and assets. If they declare a bank holiday, devalue currency and restructure it will all be worthless...It is all paper "derivatives"

I cashed out the 401 this past year. Lost nothing in fixed account. I advised many (I worked in IT departments at Citizens Bank and StateStreet) I was on the trading floor when the meltdown started in March, 2008

[-] 1 points by MonetizingDiscontent (1257) 12 years ago

"""""it will all be worthless...It is all paper "derivatives"""""

ya. belly button lint could actually have a better return.

...but wait! there is always the Presidential Futures Market =)<

::::::::::::::::::::: Max Keiser on -Capital Account- :::::::::::::::::::::

::::::Presidential Futures are like“Running Man on Steroids”::::::

(((Video))) http://maxkeiser.com/2011/12/27/max-keiser-on-capital-account-presidential-futures-are-like-running-man-on-steroids/

-December 27, 2011- (Max&Stacy re-posted this for those who missed it)

[-] 0 points by NewEnglandPatriot (916) from Dartmouth, MA 12 years ago

Belly button lint, or lint in general is an excellent survivalist way to start a fire.

One spark, so yea it probably will have more "value" in the times ahead