Central Bank Intervention: Much Ado About Nothing - by Stephen Lendman
Intervention can't stop cratering economies.
On November 30, the Fed, ECB, Bank of England, Bank of Japan, Bank of Canada and Swiss National Bank acted together to cut the rate on dollar liquidity swap arrangements by 50 basis points. Markets surged. Irrationally trumped reason.
What, in fact, was accomplished? Swap lines were always available. From 2007 - 2009, they were initiated or expanded globally four times.
Lowering the price modestly was done to ease pressure on troubled Eurozone countries. However, funding isn't the problem. It's solvency. Nonetheless, the ECB perhaps agreed to be lender of last resort, at least to some degree.
Expanding its balance sheet may lower sovereign debt yields. At issue is the ECB's ability and willingness to tackle a $6 trillion debt problem when serious restructuring is needed. Kicking the can further down the road won't work.
Fundamental problems remain. Adding more to unsustainable levels compounds crisis conditions. Radical monetary surgery is wrongheaded. At best, short-term gains will cause far greater trouble ahead. Analyst Yves Smith asked, "Does Anybody Who Gets It Believe Central Banks Did All That Much Yesterday." Comments below followed:
Economist Paul Krugman commented, saying: