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What did the Fed know?

Written By Brian Hicks

Posted December 1, 2011

The Fed did nothing but screw us – again.

Markets over-extended themselves this week on hopes that the European fiasco is finally over.

It’s not. Any one with a working brain knows that.

The Fed moved on blatant desperation. And it managed to do nothing more than kick the euro can down the road.

Just why did the Fed act so quickly this week? What does the Fed know that we’re not privy to?

One answer, according to Phoenix Capital Research, per Zero Hedge:

“November was a horrible month for this crowd. And with Bank of America approaching $5 per share (a level which would require many institutions to liquidate due to regulations), the Fed was also helping out its favorite insolvent bank as well.”

“Aside from this, Europe was approaching the End Game.  Germany won’t permit the ECB to print nor to issue Euro-bonds. The EFSF plan was dead before arrival, failing to even stage a 3 billion Euro bond auction without having to step in and buy the bonds itself. And the IMF wasn’t going to be an option either.”

“Put another way, ALL other bailout options had failed for Europe. The Fed was the lender/ intervener of last resort. That alone should have everyone worried as it indicates just how dire things had become in Europe. However, there’s something far more worrisome about the Fed’s move which is that: IT SOLVES NOTHING.”

“Europe is facing a solvency crisis. Lowering the cost of borrowing Dollars does absolutely ZERO to help European banks raise capital. All it does is provide even more easy credit… which of course is the entire problem to begin with.”

The Fed’s inflationary move does nothing to solve Europe’s crisis. Nothing.

For Bernanke to not understand this is mind-boggling.

Don’t be fooled into thinking the Fed did something smart here. They didn’t.