Tuesday 20 September 2011

basta and geldpolitik

I am not sure what to make of this Fire Sale that the United States has announced with its apparent intent to offer unlimited US dollar-denominated loans to try to hold interest rates down for European countries coming against their debt thresholds. This emergency relief seems like a mechanism to undo the gossipy damage done by downgrades from the credit rating agencies, since credit-worthiness determines the upward usury on loans--in other words, to allow everyone to keep playing. Though ostensibly Germany's Federal Ministry for Food, Agriculture and Consumer Protection (Bundes-ministerium fรผr Ernรคhrung, Landwirtschaft und Verbraucher-schutz) may be an exception, it seems like most of the work of governments, bullied by supranational finance institutions, is devoted to protecting the lender organizations and promoting good PR for their schemes and trustworthiness, with little regard or recourse for the debtors. Holding players to another round, without rigid or fair rules to play by, instead of allowing a pass or fold yields diminishing returns and impoverishes everyone, no matter what the window-dressing. These insubstantial lifelines tossed to the EU allows the dollar to dodder a bit longer at favourable lows and generates nominal revenue off of phantom loans, and a fixed margin of appreciation (how much the dollar-euro exchange rate varies) keeps the borrowers from speculating over-much against the lenders. If the euro value tumbles, the dollars become the functional currency, but if the euro gains in value against the dollar (as it should do because the European market are inherently stronger and more stable), such debt becomes cheap to pay off. The euro is not in distress and it does not need this kind of American chivalry and chauvinism (and maybe the munificence of others too), and it looks as if the creditors' champions have succeeded in expanding (diluting) their money supply without immediately and clearly sacrificing the security of their players for their very next round.