Mark Thoma of CBS’s Money watch outlined the plans of several central banks to bailout Europe in an article titled “Will the Fed’s move to help Europe hurt the U.S?”. This article was written the same day that central bankers around the globe announced their decision, and briefly describes the potential costs and benefits of such a plan. Additionally, the article ends by stating that this move may indeed smooth market conditions, but does very little to actually address the primary problem involved in the European debt crisis. Henceforth central banks around the globe have agreed to provide liquidity swaps in an attempt to reduce the costs of loans between central banks. Therefore countries such as Greece could benefit from this plan since their government would end up paying less for the loans they need. Thus it is reasonable to assume that although this plan doesn’t address the underlying problems inherent in the EU sovereign debt crisis, it may indeed mitigate some of the economic woes plaguing countries such as Greece.
On a final note I would also like to point out that this isn’t the first time that the United States has involved themselves in providing liquidity loans to a foreign country. The last time our government did such a thing was in the mid 90’s when the Treasury department made a 20 billion dollar loan to Mexico. Not only did these loans prevent a border country from becoming a failed state, but it also produced a $500 million profit for the Treasury department, and therefore extra revenue that helped to pay down our deficit. Thus why would anyone oppose the Federal reserves plan in bailing out Europe? Not only could such a move potentially help to pay off our deficit, but it may very well prevent the EU from economic collapse.