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True story; a swap line doesn’t help them when they need euros to pay off their debts.
Swaps let you bury money when you don’t need it; they don’t let you escape the minimum circulation required to avoid a default.
Mr. Cain’
but it provides temporary liquidity thus staving off downside action from asset impairment…no ?
Not really.
Let’s say Italy needs 50 billion euros by January 15.
They don’t have 50 billion euros.
The U.S. provides them with a swap line to receive dollars for euros/interest/whatever, in limited cases freeing up euros they have in savings.
They still do not have 50 billion euros.
Basically, if the ECB does not take the bait and print, this does absolutely nothing for the EU.
Interesting Cain’,
so why was the market so happy ? No immediate default ?
Essentially a short term solution to a long term problem….no?