The New York Times reports on the Federal Reserve's decision to intervene in the European debt crisis by financing the ECB's Greek bailout,
The Federal Reserve announced that it would open currency swap lines with the European Central Bank — in essence, printing dollars and exchanging them for euros to provide some liquidity for European money markets and banks.
This is almost exactly what happened in the early 1930s in Europe, as explained by Garet Garrett in The Bubble That Broke the World. I re-cap it in my piece, "Garet Garrett's Invaluable Lesson". I write,
The late 1920s and early 1930s was a period of fear throughout Europe. Currencies were losing value, governments were building debt, and animosity was again quickly spreading between governments. European central banks were having issues remaining solvent while still providing liquidity to their governments. As a result, they often looked to the New York Fed and a host of private banks in the United States for credit to provide this liquidity.
Ultimately, the solvency of the Bank of England and the Reichsbank depended entirely on the solvency of the US Federal Reserve System. The Fed could only remain solvent as long as the Europeans repaid their debts, and by 1930 it was becoming obvious that these countries were borrowing far more than they could afford to repay.
Only, how many times greater will the impending crisis be?
All one can do is make bets in the stock market.
What's wrong with a little less competition and a little more solidarity?