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“I would rather the man who presents something for my consideration subject me to a zephyr of truth and a gentle breeze of responsibility rather than blow me down with a curtain of hot wind.”
Grover Cleveland

Commentary & Analysis
To: Europe
From: The Federal Reserve
A $1 trillion Merry Christmas, more or less!

The $50 billion in renewed FX swap lines at the beginning of December was a nice stocking stuffer for the eurozone. And you might recall the recent disclosure of the $7.7 trillion that the Federal Reserve loaned out to global banks to stem the impact of the 2008 financial crisis.

But the big present has yet to be delivered.

Many sit and wonder what form QE3 may take; while others worry that the US may more directly try to bail out the eurozone.

Perhaps the Fed will go the expected route of buying up mortgage-backed securities. The palatability of additional bailout/stimulus in the US is pretty low, but something aimed more directly at the withering US housing market will probably be tolerated a bit better than past efforts.

And consider it a done deal if the Fed/Treasury also wants to head down the path of rescuing Europe. The majority of Americans probably won’t fully understand the need and efficacy of a US-to-Europe bailout. But they will surely be ticked off if the Fed is seen as doing something for Europe but nothing for the US.

Christmas is getting close, but this bailout package probably won’t be delivered until next year … despite the wonderful headlines that would materialize should Santa Ben drop by this week.

Anyway, here is the expected gift as drawn out by Anthony Sanders in a testimony to the Congressional Oversight Committee (via Zerohedge):

… according to Sanders, the relaunch of the Fed’s swaps program may "get to the $1 trillion level, or perhaps even higher."

That’s a good twenty times larger than the recent relaunch and nearly twice as large as the peak after the Lehman Brothers collapse. Oh boy.

But when you start using esoteric words like ‘fx’ and ‘swaps’ and ‘lines’ people stop listening because it’s tough to make the connection of how that arrangement impacts the taxpayer. Which is why it will make more sense to focus attention on the IMF …

From Mrs. Christine Lagarde referring to her playbook for saving the eurozone –


"There is no economy in the world, whether low-income countries, emerging markets, middle-income countries or super-advanced economies that will be immune to the crisis that we see not only unfolding but escalating," "If the international community doesn’t work together, the risk from an economic point of view is that of retraction, rising protectionism, isolation. Set: "It is not a crisis that will be resolved by one group of countries taking action. It is going to be hopefully resolved by all countries, all regions, all categories of countries actually taking action."


“What is happening now is that conversations, contacts are taking place between the fund and its membership about the scale and the amount in which this could be brought to a conclusion,”

Everyone knows the US is the dominant force in the IMF, especially considering the state of European economies. And there is a tangible enough connection between the United States’ IMF exposure and the receipt for the US taxpayer.

Sounds like the perfect smokescreen for Santa Ben to boost those swap lines while the US public is fighting the rescue initiatives of the USA via the IMF.

Because as German Finance Minister Wolfgang Schaeuble has said, “Washington cannot make bilateral loans available to the IMF without Congress approving it … and there’s no chance of that and the American government has always made that clear,"

Perfect – thank you, IMF, for another non-event to help Europe kick the can a little further down the road while countries navigate ratings downgrades, lackluster bond auctions, uncomfortably high lending rates, national austerity, agreement on zone-wide fiscal cohesion, capability of bailout fundraising and decisions to transfer funds from recently popularized acronyms, like EFSF and ESM, into the IMF.

And, of course, the ECB is still playing hard to get.

Just keep all that in mind as you place your bets on the timing of the coming financial system collapse! In the meantime, maybe this little chart can offer some nearer-term guidance …

Can Dr. Copper buck the downtrend? The 100-day moving average and trend channel resistance suggest copper will continue lower. The red metal seems to have presaged financial market risk-aversion a few times already this year, breaking down before the broader markets. A breakdown here might catalyze a similar reaction: