And So I Go: Yesterday, Today and Tomorrow

US Tax Payers bail out Europe!

Posted on: May 11, 2010

US Exposure to EU Bailout Is Big But Risk Is Limited – CNBC

Check out this head line then read the story and determine for yourself how much “risk” is involved.  But then I an quoting CNBC in this post.  I started to use other more sane articles but noticed that although CNBC tries to put a pretty face on it they do accurately state the salient facts, so decided to give you another point of view as I am tired of being called a racist, bigot and intolerant to name the nicer things said to me.  :)  BB

The US is a participant in the IMF,(International Monetary Fund which is a sort of world piggy bank)  which has agreed to work with the European Union to help countries that come under debt duress.The IMF has pledged a one-third share of the 750 billion-euro ($952 billion) rescue package—typical of the fund’s arrangements with central banks in such cases.

That would come to 250 billion euros, though that is only a rough figure and dependent on a variety of circumstances, according to an IMF official who spoke on condition of anonymity because of the uncertainty still involved.

The US would be responsible for 17.09 percent, or $54 billion, of the cost using a quota contribution system the IMF uses in such instances. The US is the leading contributor under the quota setup.

But pinpointing the exact figure is difficult because all loans are not created equal, and will depend on the currencies in which they are issued and the arrangements between the parties.

The Europen Debt Crisis - See  Complete Coverage

The  European Debt Crisis - See Complete Coverage

Also, the basis of the loans won’t be solely on the quota calculation, which accounts for only half the formula. The other half is a pro-rated basis for which the US does not currently have an agreement but is likely to in the future. That pool comes from wealthier countries with “useable resources,” with the typical arrangement for the US being higher than the 17 percent for the quota share.

The US also is exposed in currency swaps, where the Federal Reserve loans dollars to foreign banks in exchange for euros, ( Of course the Europe is on the brink of collapse and the euro is its currency.  I guess from this the Feds would even be willing to take  Monopoly money.  BB)

That arrangement, too, has drawn criticism in part because of the danger of default and worries over the rapidly devaluing euro.

But these swap trades are virtually without risk as the ECB is the entity responsible for backing up the swaps. The ECB is responsible for returning the money to the US along with a slight interest appreciation on the loan.  (but the ECU European Central Bank is about the same as our Federal reserve and we know what shape the Federal Reserve is in, so maybe this:  European Central Bank to intervene in bond markets

– AP via Yahoo! Finance – May 10 05:13amAlarmed by the risk to the euro, the European Central Bank exercised what analysts called its “nuclear option” Monday, announcing it would buy government bonds to... full story

“These (swaps) operations will be a net positive for fiscal conditions,” said Zach Pandl, economist at Nomura Securities International in New York. “They contain no credit risks whatsoever. The counterparty is the foreign central bank. There’s basically no debt. The European Central Bank is going to pay back the loan.”  (Where have we heard this before?  You can not bleed a turnip or a bankrupt coalition of countries people!  BB)

The swaps, though, will make the Fed’s balance sheet grow to perhaps $2.5 trillion from its current $2.3 trillion, said Delta’s Pento.

Putting more US money into circulation at a time when the central bank is trying to shrink its balance sheet will only add to inflationary pressures down the road, he said.

“With an over-$2 trillion monetary base, the damage is already there,” Pento said. “You’ve lit fire to a building that is already burned down.”

Pandl said the swaps transactions could total as much as $100 billion, “which is nothing to sneeze at. But compared to the Fed’s balance sheet, it’s still a relatively modest sum.”

Correction: An earlier version of this story overstated the risk that US taxpayers face in the European bailout fund. In both loans to the IMF and currency swaps, the risk to taxpayers is limited.

© 2010 CNBC.com

2 Comments Total
COMMENTS
ivan1969 | May 11, 2010 12:36 PM  ET
Do we get our own little piece of Europe?!
Realitycheck1 | May 11, 2010 12:36 PM  ET
What a laugh. 50 billion in American taxpayer money and another couple hundred billion in swaps so Greek hairdressers can fully retire at age 50. Let’s see if Europe is there for us when it comes time for our bailout.

4 Responses to "US Tax Payers bail out Europe!"

I am very much against the USA getting involved with the European bailout. I don’t recall Europe offering to assist us in the last year. Nor do I recall Europe offering to assist us with the Katrina catastrophe, or the Oil problem in the gulf, that we now have.

Actually I’m tired of the USA always being expected to assist any and every country around the world any time they have a catastrophe. I don’t mind when we have the money, but it seems that even when we don’t have it we are expected to participate.

The time has come for America to wake up, and start acting fiscally responsible. We cannot take on the financial problems of the world no matter how much we would love to help, when we cannot fix the problems in our own country.

Louisiana is still not rebuilt, we have just had major flooding in Tennessee, Numerous tornados destroyed many areas in Oklahoma, and Kansas, in the last few days, and where is the government help?

We should have men, people, from all over the country to assist in clean up in these areas. I mean we do have millions of people out of work. Why can’t the government pay them to go to these areas and help clean up and rebuild what has been destroyed.

Now if this happened in another country, we would already be there assisting with money, first aid, and clean up and rebuilding. What’s wrong with this picture? ss

What’s wrong with us? Obamanation BB

Have you noticed how the people who have been flooded out and have been hit with tornadoes are rolling up their sleeves and rebuilding rather than sitting on their asses and moaning for the government to do it like New Orleans?

Fact: New Orleans have more government welfare checks coming in each month than any other city. Do you think maybe this is the reason the people of New Orleans are so irresponsible and apparently unable or unwilling to take care of themselves? I remember seeing mothers with babies in the super dome during Katrina who had come there with one or two diapers! and of course no one brought food. What a difference in working Americans and welfare Americans. BB

I agree with you 100% Brenda, Louisiana is full of welfare recipients. And all to often or should I say more often than not, welfare recipients are lazy, and live only to receive another government handout. I wrote about this in an article about Detroit, it’s on by blog. they can not help to rebuild Louisianna if they do not have the will or the knowledge to do so.

Let’s face it these people have given up, and expect the government to take care of them and they pass this philosophy on down to their children. So, when a catastrophe comes along they are totally helpless, expect to be taken care of, and do nothing to help themselves.

They are not only uneducated and therefore they have no idea as to what to do to help themselves, but they have no common sense either, which comes from education and real world experience. Their world has been welfare, no jobs, and no hope of getting one, because they have no education. It’s been a vicious circle and must be broken.

On the one hand, I can understand their hopelessness, on the other, I know it doesn’t have to be that way. They need encouragement, which one gets from an education. Something they have not received. At this point is doesn’t matter why, but it does matter on what needs to be done to fix the situation and adult education is what is needed, in these areas where so many are receiving government checks.

There is no way an education will help the children of these welfare families if the education they recieve in school is not reinforced at home. These children need to get positive educational reinforcement at home if they are to succeed, but can not recieve that reinforcement if the adults at home are not also educated.

Actually in order to receive continued welfare, the recipients should have to attend school. Yes, all these adults, parents and high school dropouts should be attending school, to learn how to read, write, and speak (English) because they can’t even do that properly. Getting educated must be mandatory if they want welfare checks.

They should be given lessons in what society expects from them, including child rearing classes. All this would be to help them understand not only what they need to do to help themselves, but why they need to show some initiative in encouraging their children to get a good education, so they can have a good future.

Included in their schooling should be some basic English classes, job training, and maybe some home job skills. They should also be given lessons in housekeeping and home fix-it lessons, like changing filters in the furnace, painting walls, weeding around the yard etc. washing floors, clothes etc.

Most of these people are second and third generation welfare recipients and have no clue as to what to do to survive.

I don’t believe in life long welfare, helping those who need it for a period of time while they get schooling and job training is fair, but all good things must come to an end. It’s basically, last chance time. If you want some help we’ll pay you your welfare checks while you get the equivalent of a high school degree, or some type of certificate stating you have passed the adult extended welfare education program. Which will also include learning proper child rearing techniques, basic health care, cooking and housekeeping skills to continue receiving a check.

If we are going to hire all these government people anyway, lets give them some actual work to do, like going out and making sure these welfare recipients get the training they would be required to get while receiving government checks.

In the long run, it will help them to help themselves, teach them to be responsible, and hopefully in time stop this generation after generation of welfare recipients by creating responsible and educated citizens. They need to be shown the way.

Change your thinking and you can change your world.

“Actually in order to receive continued welfare, the recipients should have to attend school. Yes, all these adults, parents and high school dropouts should be attending school, to learn how to read, write, and speak (English) because they can’t even do that properly. Getting educated must be mandatory if they want welfare checks.

They should be given lessons in what society expects from them, including child rearing classes. All this would be to help them understand not only what they need to do to help themselves, but why they need to show some initiative in encouraging their children to get a good education, so they can have a good future.”

YES!! This and the expectation that they will soon be on their own rather than on me and you. this is why private charity was the best form of welfare. When the poor were helped by friends, neighbors and churches they knew they were expected to one day pick up and help themselves or eventually the help just stopped. When government gets into things they just get complicated and expensive.

Yes, I enjoyed your post on Detroit. It was right on. BB

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