Europe's economic situation is in crisis and they are scared that their will spread to other countries. Greece is already very close to having their economy fall apart. In addition to our Federal Reserve, other banks such as the Bank of Canada, the Bank of England, the European Central Bank, and the Swiss National Bank and the Bank of Japan also are involved in the dollar swap effort.
"The crisis has pushed up demand for the U.S. dollar and has sharply weakened the value of the euro, the currency used by 16 European countries. Eurozone ministers and the IMF this weekend approved a $140 billion rescue package of loans to Greece for the next three years to keep it from imploding."
So even though we are in a recession, we are supposed to bail out Europe?
Sunday, May 9, 2010
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2 comments:
If I'm reading this correctly, it means we're giving out more loans to European banks, which in the long run, won't be a bad thing. The article already stated that there is a higher demand for the US dollar than for the Euro, thus pushing up the value of the dollar and devaluing the Euro. This demand can be explained by the fact that US dollars are legally secure. We have never failed to pay back a debt, even if it's many decades old. I suspect that the Euro devalued after bailing out Greece because Greece doesn't have a high credibility for paying it back or giving a return on the investment. They're broke after all.
The logic can be simple. We supply their demand for our dollar, then we make them more dependent on our currency. This, of course, sharply rockets the value of the dollar.
I agree with kevin.. that it might be a good thing that we are bailing europe out. so that our dollar can regain some of its value.
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