Jim Sinclair’s Commentary
The international lender of last resort remains the last resort.
Hyperinflation in the form of currency induced cost push inflation is here and growing. That is the reason releasing oil on the market only greases the wheels of energy cost.
Fed Extends Lending Program for Central Banks
By LUCA DI LEO
JUNE 29, 2011, 5:50 A.M. ET
WASHINGTON—The Federal Reserve, amid persistent worries about Europe’s sovereign debt crisis, last week quietly approved the extension of a crisis-lending program that allows the European Central Bank to tap the U.S. for dollars, Federal Reserve Bank of St. Louis President James Bullard said.
The Fed’s dollar-lending agreements with the ECB—as well as the central banks of England, Canada, Japan and Switzerland—were scheduled to expire Aug. 1. The Fed and other central banks haven’t yet disclosed renewal of the agreements, known as swap lines.
Fed officials voted to extend the program, which was first launched during the financial crisis, at their latest Federal Open Market Committee meeting June 21-22, Mr. Bullard said in an interview Tuesday.
Under the agreement, the Fed can lend an unlimited amount of dollars to foreign central banks for a fee, and they in turn lend them to local commercial banks. The program was launched during the crisis because many foreign banks, especially those in Europe, had trouble tapping short-term dollar loans in credit markets, yet they needed access to dollars to fund their holdings of mortgage bonds and other U.S.-dollar-denominated debt.
The Fed says it takes no risk in these swap lines because foreign central banks, not the commercial banks, are obligated to return the dollars. At the height of the financial crisis, foreign central banks tapped the Fed for more than $600 billion of these loans.
Jim Sinclair’s Commentary
If you are broke, you’re broke. Pretending you are solvent when you are broke as a nation brings on hyperinflation.
Ron Paul: U.S. should declare ‘bankruptcy’
By Charles Riley @CNNMoney June 28, 2011: 12:55 PM ET
NEW YORK (CNNMoney) — How should the United States deal with its growing debt problem? Ron Paul thinks declaring "bankruptcy" might be a good idea.
The Texas congressman and Republican presidential candidate was discussing Greece’s fiscal trouble with Iowa radio host Jan Mickelson on Monday when he was asked, "If bankruptcy is the cure for Greece, is it also the cure for the United States?"
"Absolutely," Paul replied.
Of course, sovereign nations can’t declare bankruptcy the same way a corporation might. Instead, the government would be unable to fulfill its obligations, and would stop making payments on its debt, resulting in a default.
Greece is currently embroiled in a debate over how to pare back its social programs and government spending to secure another bailout for paying its debts.
Paul said social programs — medical care and other benefits — have pushed Greece to the edge, and the United States should take note.
"The big message there is the fact that the people who are seeing they are losing their benefits and their free medical care and all, are rioting in the streets," Paul said. "That is the problem, and we are not immune from that."