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Ashley Webster with me as well.
Our top story Ben Bernanke and world central banks come -- Europe's rescue lowering the cost of emergency dollar funding.
Ward McCarthy chief financial economist with Jefferies joins me right now on this.
Continuing story and -- -- you first on this -- were you surprised.
When you saw the headlines crossed this morning from the -- well I -- And surprises in the sense that the feds already made it pretty clear that they're going to do whatever they need to do to make sure that the problems in Europe.
Do not become a global financial crisis so as far as the timing sure you know I didn't really know they would do anything this morning.
Although yesterday vice chairman -- Allen did hint that some coordinated effort on the part of central banks.
Was a good -- -- and probably something that was going to happen.
Dozens of and they just walk up this morning -- decided to do these things take time they take credit -- -- conference calls they knew that this move was coming no specific reason it was done this morning.
Well not that I'm aware of anyway.
The -- there has been some building pressure as far as dollar funding in Europe is concerned.
And frankly the Fed just wanted to do two things today -- -- wanted to preempt.
The possibility of that from from spreading -- to that wanted to send a strong signal to the global financial markets.
That they stood stood ready to do whatever is needed to make sure that the financial sector continues to function.
But what I'm curious if this move today signals to you.
That basically the EFSF has been a failure.
And that no action has been done to satisfy markets there for the central banks had to step and and say what could have been disaster for the sovereign debt in Europe.
Well I don't really relate -- to the SF ask them what the Fed did today I think cared really primarily.
What I do think however is that in general the the volatility that we've seen in the financial markets.
And the vulnerability of the economies basically -- -- reflect political risks.
Because the politicians in Europe and in the US really have not been able to get their act together.
In a way to address there are.
-- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- Of the dollar down goes the dollar up those the Euro if you look at the S&P futures huge jump.
But does that stay I think the main question for but it home is is this a short term fix a short term market rally or can we bank on what has happened -- I.
I think this is a great example of what we've seen in the past and this is -- throwing money at a problem and I think there's anything that we have learned and in the where.
What we're doing is fixing in the short from a liquidity crisis but that.
The fundamental problems of Europe are still hear the ones that we had yesterday are still here these these.
You know problems with the deleveraging and and the sovereign -- crisis so.
In my opinion this is gonna be short lived I think guy investors of using it as an opportunity to sell we've seen that when we've had these kind of rallies throughout the year and I think this is no different.
And Ashley you were on the ground for Fox Business in Europe and all of the writing that you covered in particular now happens back out of the day was over austerity measures the people of these countries.
Have a complete -- taste for any austerity measures yes yet the market's have a severe -- taste.
If these austerity measures are not exact.
-- will cause no one likes have to go through those kind of horrible strict measures they have to which was created by the governments and yes they live -- the hub for about ten years now the paying the price.
This live today really is giving access to dollars to European banks where they have seen liquidity freeze -- -- having to take that 50% haircut on the Greek debt.
That having trouble getting access to dollars people -- Leary to lend to them because of -- Beyond -- there is in Europe and I think this is estimated to give just some US dollars and to European banks.
-- I wondered to ward this question is free I wonder too if if what we saw in Germany with -- borrowing costs going up for of all people the Germans which is somewhat of a surprise that they into the markets.
Was up kind of -- final straw.
For the Fed and the other.
Thanks to move.
Well I think it could be but I think it's more likely to be a catalyst for.
The politicians in Europe to finally do some of the things that they need to do.
Take the shackles off the ECB so we can expand its balance sheet the way the Fed has done.
In a way to address the financial crisis and also to eventually get three year old bonds which are quite frankly.
Is something that is -- -- is a piece right now that Europe needs to complete the picture and and be able to address their problems but.
-- this is Tyler Vernon we're seeing a lot of optimism behind this statement this morning the Dow's up 400 something points.
Can you talk about the downside of this recent move by the Fed and and that we then what -- that the negativity.
Potentially that's out there from this massive amount.
-- stimulus that's being inject.
Well -- I don't think there's any downside to what the Fed announced today that just simply saying that.
This standing by and if people if banks need to get dollars that are -- -- to be able to.
Fund themselves and address liquidity issues then.
The Fed won't make it available only right now those swaps are relatively low 2.3 billion keep in mind they peaked at 582.
Back in December of oh wait so right now we don't really have a significant problem in the -- just saying they're not gonna let it become the significant problem.
To the extent that the Fed has been drawn into this it's because.
As was mentioned earlier that the European governments.
Have let -- situation devolve.
In two the possibility that.
-- going to -- you know complete follow part of of the union.
So the Fed is just simply making sure that the financial system with the with the banks doesn't make things -- now.
But toward you you know from a US taxpayers' point of view.
Did not going to be particularly pleased the fault of their -- money is going to bail out these -- European banks and economies but that's not what's happening this is a swap arrangements so.
What happens is that the Fed will give the Central Bank dollars and it will take back whatever that currency is most likely it's going to be euros.
And then at some point in the future -- rebirth that so this doesn't cost the taxpayers.
Where McCarthy chief financial economist at Jefferies -- thank you for coming in today covering the breaking news we're following that we're gonna follow throughout the afternoon the Dow is up 400 --
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