WASHINGTON, DC, February 13, 2013 ― Ben Bernanke announced in September that the Federal Reserve would buy $45 billion per month of mortgage backed securities. In December, he announced the Fed would be purchasing $40 billion per month in US treasuries.
Since then, bank holdings of mortgage backed securities have barely budged. What little change there has been, has been upward. The banks are buying, not selling the MBS.
So where is the money going?
Every Friday the federal reserve releases a report called the H.8. It is not an entertaining read. Line 25 on page 18, however, is very interesting. It indicates that the cash assets of foreign banks which have divisions within the US mysteriously jumped, between January second and this past Friday, by $228 billion.
This is nothing new, but it would certainly be new to most Americans. A second round of quantitative easing, QE2, was used in the summer of 2011 entirely to prop up failing European banks.
Cash to domestically-chartered banks has actually declined in the last month. This creates a more difficult lending atmosphere for Americans wanting to take out a loan, slowing any possible recovery efforts that may have otherwise occurred.
While there is a a global economy to worry about, would it not be prudent that the massive amount of loans that we have made to European banks (which have been giving some very nice executive bonuses) should at least be made common knowledge to Americans struggling to get by?
The fear of a systemic collapse (the domino effect) is very real should the Euro-zone suffer a catastrophe. This does not preclude American citizens, the ones who are footing the bill, from knowing where their money is going.
The Euro-zone has proven itself to be a financial black-hole. Greek housing-start data recently indicated a 66.6 percent drop year-over-year, with just 1,156 housing permits issued in the entire country in November of 2012. The Greek economy has quite literally ground to a halt. They are operating almost entirely on borrowed money. While many realize that, they do not realize from whom they are actually borrowing.
But it is not just Greece, not by a long shot.
Spain has 730 active cases involving 314 politicians on corruption charges.
Giuseppe Orsi, CEO of Italy’s second largest company; Finmeccanica, was recently arrested on charges of bribery for his alleged involvement in greasing the palms of government officials from India to get a lucrative helicopter contract. Italy is the majority shareholder of Finmeccanica, which has taken not only a huge hit to its share price, but has likewise suffered significant damage to its reputation, leaving the future of its 70 thousand employees, (11 thousand of which are in the US) uncertain in tough economic times.
Nearly every European country has its own headlines these days, be it corruption or insolvency, and you and I are footing the bill.
I just thought you should know.
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