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"The Fed has the authority to buy foreign government debt," said Ben Bernanke in 2002....

"The Fed has the authority to buy foreign government debt," said Ben Bernanke in 2002. "Potentially, this class of asset offers huge scope for Fed operations." With the ECB's hands apparently tied as the eurozone crisis threatens to spiral out of control, has the time come for the Chairman to step in? "The Fed needs to buy up every single European bond owned by every single American financial institution for cash," says Brad DeLong.
Comments (47)
  • thotdoc
    , contributor
    Comments (1417) | Send Message
     
    This is BullShit. I get to pay more for the mistakes of the best and the brightest woe are doing God's work?

     

    When does the FED by my indebtedness?
    27 Nov 2011, 04:01 PM Reply Like
  • dividend_growth
    , contributor
    Comments (2878) | Send Message
     
    Well, that would be the job for the Congress and White House. But voters apparently rejected the approach of Federal Government handing out money to the people in 2010.

     

    You should thank Tea Party for cutting off Federal Government's attempt to reduce your indebtedness.
    27 Nov 2011, 11:17 PM Reply Like
  • klarsolo
    , contributor
    Comments (705) | Send Message
     
    Yeah, not going to happen.
    27 Nov 2011, 04:02 PM Reply Like
  • Stone Fox Capital
    , contributor
    Comments (5776) | Send Message
     
    While I see some benefits in buying foreign govt debt especially if you can buy in enough bulk to impact the course of the rates, it just isn't wise for the US to make a big move. Maybe via the IMF.

     

    In no way does the FED need to buy European bonds from US firms. Not only do US companies own very limited amounts, but it isn't even at risk. Not to mention, Italy and Spain need people stepping up for the new issues not buying what is already on the books. Rolling over debt is the key.

     

    A few good bond auctions and the hysteria goes away.
    27 Nov 2011, 04:14 PM Reply Like
  • Josh Krause
    , contributor
    Comments (1361) | Send Message
     
    The key is getting those good bond auctions. Currently no one wants Euro debt. That will continue until the ECB/Fed/China lets loose a Bazooka round.

     

    Until then no one wants to get back in the water in fear of the bond vigilantes having their way with them.
    27 Nov 2011, 04:31 PM Reply Like
  • WMARKW
    , contributor
    Comments (10250) | Send Message
     
    StoneFox.....Perhaps I misunderstand....but the Fed is not the US....right?
    27 Nov 2011, 06:27 PM Reply Like
  • 1980XLS
    , contributor
    Comments (3314) | Send Message
     
    VMARKW,

     

    True,

     

    The Fed is not the US Gov't, but a cartel of Banksters, authorized by their congressional cronies.

     

    Bought and paid for.
    27 Nov 2011, 06:34 PM Reply Like
  • CautiousInvestor
    , contributor
    Comments (3017) | Send Message
     
    The very name of Brad DeLong occasions immediate and lasting nausea.
    27 Nov 2011, 04:21 PM Reply Like
  • deercreekvols
    , contributor
    Comments (5145) | Send Message
     
    How does Mr. Bernanke feel now, in 2011?
    Does the Fed., which can't get the US moving in the right direction, really want to dive into the European mess?
    Please let this market current just be a hypothetical.
    27 Nov 2011, 04:30 PM Reply Like
  • untrusting investor
    , contributor
    Comments (9923) | Send Message
     
    Exactly, the Fed can't do much right in the US. So certainly won't be able to nor should they do anything to prop up the EU either.
    27 Nov 2011, 07:19 PM Reply Like
  • alibeamish
    , contributor
    Comments (342) | Send Message
     
    its the only way to save the big banks from failing like MF Global
    27 Nov 2011, 09:45 PM Reply Like
  • Sleestakk
    , contributor
    Comments (121) | Send Message
     
    In this political climate against bailouts this will be a non-starter. Heck, it will be tough enough to have this happen through the IMF.

     

    Both approaches will just make matters worse for the US later. Why not take our medicine now, suffer a mild recession, let Europe deleverage, and then have strong growth in a few years that allows for a decade long bull-run?

     

    Instead, people are advocating adding more stress to the fragile system and hoping it turns out ok later just because a few people made bad bets and don't want to take haircuts.
    27 Nov 2011, 04:30 PM Reply Like
  • Bear Bait
    , contributor
    Comments (664) | Send Message
     
    you really don't mean "take the medicine now" you are saying let things take i\their course. To continue with the medical analogy, if the patient is suffering from kidney failure, liver failure, heart failure and a whole bunch of cancers it is better to intervene than to let things take their course. I for one feel this is the case with the Euro crisis. It would be much better to deal with the problems now before they get to big and infect the entire world economy.
    27 Nov 2011, 05:06 PM Reply Like
  • The Geoffster
    , contributor
    Comments (4009) | Send Message
     
    "True, governments can reduce the rate of interest in the short run. They can issue additional paper money. They can open the way to credit expansion by the banks. They can thus create an artificial boom and the appearance of prosperity. But such a boom is bound to collapse sooner or late and to bring about a depression."
    --Ludwig von Mises
    27 Nov 2011, 06:55 PM Reply Like
  • untrusting investor
    , contributor
    Comments (9923) | Send Message
     
    No, it is much better to just deal with debt write offs and re-establish solvency. Your medical analogy is not comparable or appropriate. Europe will not die, although it may downsize and reorganize. But that is exactly what should happen.

     

    The better medical analogy is that if one has gangrene, then do you mask the gangrene with perfumes, lotions, and potions or do you operate and remove the infected part and let the remainder recover over time. It will not die if you operate but the whole surely will die if you just attempt to mask the problem with artificial nonsolutions.
    27 Nov 2011, 07:23 PM Reply Like
  • Bear Bait
    , contributor
    Comments (664) | Send Message
     
    untrusting, maybe you need to reread what I had written. Not once did I advocate creams, lotions or perfumes those were your words. I said intervene. Heart bypass surgery is intervention. Transplantaion is of a major organ is intervention. My thoughts were not to just set back and let things take their course. That in my opinion is the absolute worse thing that can be done. Unlike you I believe there are interventions that can be untaken that will lessen the severity of this crisis and could prevent a possible worldwide depression. I don't subscribe to the thought "just toughen up and take it becasue it's going to happen anyway."
    28 Nov 2011, 08:38 AM Reply Like
  • 1980XLS
    , contributor
    Comments (3314) | Send Message
     
    If I could print money, I would buy the junk too.

     

    Even with a 50% haircut, it's still pure profit.
    27 Nov 2011, 04:32 PM Reply Like
  • Vuke
    , contributor
    Comments (1645) | Send Message
     
    Very good observation 1980XLS. In fact even losing 90% it still makes money. Mind you, there'd be a lot of USD sloshing around so a bag of carrots may reach $10.
    27 Nov 2011, 05:03 PM Reply Like
  • untrusting investor
    , contributor
    Comments (9923) | Send Message
     
    Wrong, all you do is make profit for yourself and transfer the losses to others in society. That's how crooks, fraudsters, politicians, and crony capitalists think and rationalize their theft.

     

    One can only hope that you are man enough to face the lynch mobs when they come to collect their dues from you and those like you. Turns out Gadaffi and his sons weren't so brave when the lynch mobs finally came for them either.
    27 Nov 2011, 07:33 PM Reply Like
  • Vuke
    , contributor
    Comments (1645) | Send Message
     
    UI, you may have overlooked the sarcasm in the comments.
    27 Nov 2011, 10:26 PM Reply Like
  • untrusting investor
    , contributor
    Comments (9923) | Send Message
     
    vuke,
    your probably right, likely missed the intent and probably was doing a couple of things at the same time. apologies if i did and was overly snarky.
    28 Nov 2011, 12:42 AM Reply Like
  • GOLLIATH
    , contributor
    Comments (47) | Send Message
     
    Yessssssss!! More bullish news.

     

    The Fed should help the Euro as this would help the US growth. I think doing QE of 500B should also help a lot.

     

    Shorts are F...
    27 Nov 2011, 04:38 PM Reply Like
  • deercreekvols
    , contributor
    Comments (5145) | Send Message
     
    Didn't MF Global play this game and lose their entire company? Seems that there is always the next "smartest guy in the room" just waiting to prove how much brighter they are than everyone else.
    27 Nov 2011, 04:47 PM Reply Like
  • WMARKW
    , contributor
    Comments (10250) | Send Message
     
    You mean they lost their investors money.
    27 Nov 2011, 06:30 PM Reply Like
  • deercreekvols
    , contributor
    Comments (5145) | Send Message
     
    You are right WMARKW, they lost their investors money. I am sure MF Global management closed up shop with nice "bonuses" all around.
    Thank you for your correction.
    27 Nov 2011, 07:03 PM Reply Like
  • WMARKW
    , contributor
    Comments (10250) | Send Message
     
    Deercreek....my point is that when you look at the banksters and fraudsters in the market.....they always seem to find a way to put other people's money into their pocket. And now you have Congress making money on insider transactions that would get you and me put in jail. Seems even the Solyndra crooks are looking to get "severance" packages. We couldn't make this stuff up could we.
    27 Nov 2011, 11:43 PM Reply Like
  • davidbdc
    , contributor
    Comments (3141) | Send Message
     
    Give me a *#%@@*^ break. This is all nonsense. All these countries have to do is to cut government spending. Period. You can't falsely boost standards of living indefinately. The game has ended and now governments have to tell people the truth - you aren't "entitled" to anything beyond life, liberty and the pursuit of happiness.

     

    How stupid is it that we have these type of constant "crisis" all because supposed leaders can't add and subtract?
    27 Nov 2011, 04:53 PM Reply Like
  • klarsolo
    , contributor
    Comments (705) | Send Message
     
    Spain has a lot less debt than the U.S. and most Euro countries. So why are they also in the mix of crisis zones? Simple, because this is not about debt anymore; it's about politicians forcing banks to delever and de-risk. Who is still going to buy your debt after you shrank all the banks?
    27 Nov 2011, 05:15 PM Reply Like
  • 1980XLS
    , contributor
    Comments (3314) | Send Message
     
    Spain has 20%+ unemployment, a big factor regardless of current metrics.
    27 Nov 2011, 05:18 PM Reply Like
  • klarsolo
    , contributor
    Comments (705) | Send Message
     
    How does the high unemployment render Spain unable to service its low debt?
    27 Nov 2011, 05:19 PM Reply Like
  • 1980XLS
    , contributor
    Comments (3314) | Send Message
     
    Unemployed people not only do not pay taxes, they are a drag on budgets as well, via social programs. Too many unemployed also depress market wages for others stifling the inflation, that Ponzi governments rely on, to keep the scheme alive.
    27 Nov 2011, 05:22 PM Reply Like
  • klarsolo
    , contributor
    Comments (705) | Send Message
     
    I can easily see that high unemployment is not helpful, but I cannot see how his causes an immediate problem that can bring Spain to the brink over the next few weeks or months.

     

    I still see this spread widening less as an indicator of actual rising credit risk and more as an indicator of forced European bank delevering.

     

    Maybe one day politicians will realize that the best time to hurt banks is not during a financial crisis.
    27 Nov 2011, 05:27 PM Reply Like
  • GOLLIATH
    , contributor
    Comments (47) | Send Message
     
    Spain doesn't has problems. They can and would service the debt. If they can't the ECB would step in.

     

    France, Germany, Italy growth is accelerating. Retail sales, production numbers very positive.

     

    Only short sellers want to destroy the Eurozone.
    27 Nov 2011, 05:42 PM Reply Like
  • 1980XLS
    , contributor
    Comments (3314) | Send Message
     
    Sorry Golliath,

     

    Spain does "Has" problems.

     

    20%+ unemployment is a big problem, despite your being in denial.
    27 Nov 2011, 05:50 PM Reply Like
  • User 487974
    , contributor
    Comments (1105) | Send Message
     
    Screw that!
    The fed has to step back from the abyss if this train of thought is really being bantered about behind closed doors!

     

    What the frack business does our fed have going into international markets and buying foreign debt?
    Is this the "Parallel Universe or some crazy Twilight Zone alter time band", we find ourselves in today!

     

    We have NOT had a functioning free market system since Hank Paulson whipped out the "Bazooka" and Bush looked in the camera and uttered these fateful words," We have to suspend the free market to save the free market", surely you joke!

     

    "Don't call me Shirley", hat tip to Leslie Nielsen.
    But to get real, this is absolute insanity!
    Does anyone think this would actually be good for the system?

     

    He Ben, you frackin moron!
    Time, lots of gosh darn time!
    10 / 20 YEARS to un wind the excesses you encouraged. Alan Greenspan got the ball rolling in 2000 when he refused to let the market clear after the dot com implosion!
    Walla!
    We get bubble number two! The housing bubble!

     

    Deleveraging, this painfully slow process is the only cure, and Bernanke refuses to step back and do the hardest thing he has ever contemplated!
    To DO NOTHING!
    Let the market finally start to clear.
    We have no choice, it will be done, with or without Bernanke's blessing! The depression will destroy the Fed's once thought of "Credibility" and or Worth!
    This is math kids, pure and simple! No more kicking the can down the road!
    We just ran out of ROAD!
    Jerry
    27 Nov 2011, 05:28 PM Reply Like
  • Sleestakk
    , contributor
    Comments (121) | Send Message
     
    This epic global debt bubble only has one direction it can go...figuring out the direction is up to each of us.
    27 Nov 2011, 05:28 PM Reply Like
  • rjj1960
    , contributor
    Comments (1359) | Send Message
     
    Excellent idea, but every European country has to change the retirement age to 72 and start paying income tax.
    27 Nov 2011, 05:36 PM Reply Like
  • klarsolo
    , contributor
    Comments (705) | Send Message
     
    I don't get this retirement age thing anyways. You either have enough money to retire on or you keep working. It's that simple. The government should not encourage you to think that at a certain age you can just coast on its cost. Social security should be an absolute minimum benefit just to make sure that you don't end up penniless on the streets, not some benefit that allows you to have a 30 year holiday.
    27 Nov 2011, 05:50 PM Reply Like
  • 1980XLS
    , contributor
    Comments (3314) | Send Message
     
    Most Retired people, like unemployed people don't pay taxes. Aside from rising healthcare costs along with rising life expectancies, drawing on reserves.
    27 Nov 2011, 05:59 PM Reply Like
  • The Geoffster
    , contributor
    Comments (4009) | Send Message
     
    Based o the latest Fed reporting, I would think it is already buying Euro bonds.
    27 Nov 2011, 06:21 PM Reply Like
  • PotentDagger
    , contributor
    Comments (12) | Send Message
     
    Isn't it funny how just last week the FED announced a new and expanded stress test for US banks that centers around the scenario of a total EU banking collapse, GDP loss of 6.5%, and US unemplyment rates of 13% or higher lasting for over three years.

     

    If Brother Ben's plan is to become the buyer of last resort for not only US bad debt, but also EU bad debts, he does not need a "window" at the FED, he needs a G20 lane drive through.

     

    There is a song that keeps playing in my head, a Billy Joel tune that had a chorus line in it that said " and we will all go down together, yes we will all go down together".
    27 Nov 2011, 07:18 PM Reply Like
  • Marlin Keith DeBramaletta
    , contributor
    Comments (262) | Send Message
     
    I think it would have to be a business investment decision by the Federal Reserve. Most countries invest in the dollar because it is a relatively strong currency that will weather the storm. A financial emergency eliciting a response for America to intervene is a preposterous notion without financial data or modeling that indicates the potential benefits to America. Sure their is instability in the markets that could potentially result due to the Eurozone imploding. However their should be some measure of how much the US intervention would benefit America and the global markets. The situation is different from saying a political-defense strategy to intervene in a country because of potential threats as assessed by military intelligence. The situation would have to be addressed internally within the Eurozone, and then intervention with the UN or the International Monetary Fund or other strategic alliance for global capital market stability. To ask for the US to just all out invest in a product that couldn't prove a measurable return for the US, after we resolved the debt ceiling fiasco with automatic triggered spending cuts is absurd.
    27 Nov 2011, 07:34 PM Reply Like
  • WMARKW
    , contributor
    Comments (10250) | Send Message
     
    @ Martin,
    A business investment by the Fed.....and who's money is at risk. The banker shareholders, or the US taxpayers?
    27 Nov 2011, 11:46 PM Reply Like
  • HiSpeed
    , contributor
    Comments (1063) | Send Message
     
    US Fed buying EU Debt?

     

    Worst. Idea. Ever!
    27 Nov 2011, 09:45 PM Reply Like
  • dividend_growth
    , contributor
    Comments (2878) | Send Message
     
    I don't see how the Fed can buy Euro-denominated sovereign debts. However, it's possible for Fed to refinance Euro-denominated PIGS sovereign debts with USD-denominated loans. This means that Italy and co will abandon Euro zone for USD zone.

     

    The consequence of course will be the COMPLETE UNDERMINING of Germany's and Euro's trustworthiness. In WW2 language, it is the equivalent of German Reich turning its prospect of Endsieg into Unconditional Surrender after Stalingrad and Normandy.
    27 Nov 2011, 11:24 PM Reply Like
  • pokalolo
    , contributor
    Comments (318) | Send Message
     
    Well,all WS big thinkers got there answer. The problem is truly beyond Germany to expand it's massive debt an backstop it all. The conversation is with France an Germany ,but, France just slashed it's spending by 22% an has no money to help Germany.

     

    Now that the public is being made aware of possible Fed involvement. This can only confirm the cliff the EU in up against ! Sec.Geitner wanted the investment by the Fed at 8 times the US Treasury's ! The Fed puts up 8 dollars to the Treasury's one dollar. Then the Treasury would stand behind it so the Fed had no risk ! This is the way the EU will be backstopped an the Sec.and the Fed openly talked on this type of plan.

     

    Once again the US public will be asked to save there EU clientele and when things get worse who takes this haircut ! Yes ! The US Treasury an you own it !............ pok
    28 Nov 2011, 03:52 AM Reply Like
  • Marlin Keith DeBramaletta
    , contributor
    Comments (262) | Send Message
     
    http://wapo.st/tIyc73 This article indicates the investor sentiment to the situation. This article also suggests with evidence the lack of value of some of the Eurozone members' debts.
    28 Nov 2011, 08:09 AM Reply Like
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