Central Banks Take Joint Action to Ease Debt Crisis

Central Banks Take Joint Action to Ease Debt Crisis – NYTimes.com.

Very timely move as credit is tightening and numerous nations , including the U.S. depend on borrowing. Without readily available credit, any chances of growth are null.

At the core of the issue is that Chinese banks are also hoarding cash under orders of the government to reduce leverage and the money supply. The Chinese are worried about inflation.

In Europe, numerous banks are over-exposed with large holdings of sovereign debt. Just yesterday numerous banks were downgraded, including all the major American banking institutions.

Then investors do not trust sovereign bonds any longer, not after they lost 50% of their loans to Greece. The German 10 years notes offered last week received cool reception even though Germany is viewed as the most stable economy in the E.U.

The possible way out I see at this point is to further the union of Europe, democratizing the E.U – so that member of the European parliament are elected by the people – and establishing a supranational control system for national budgeting and eurobonds. The question is whether European political leaders can move fast enough or achieve those goals at all.