Telegraph.co.uk: Europe idle as US battles meltdown - by Ambrose Evans - Pritchard
Europe idle as US battles meltdown - by Ambrose Evans - Pritchard
It is the first time since the Great Depression that the US Fed has stepped in directly to absorb credit losses, crossing a line deemed unthinkable just months ago. The dramatic late-night move on Sunday required dredging up Article 13 (3) of the Federal Reserve Act, which allows the Fed to shower money on almost anybody it wishes by a vote of five governors in "unusual and exigent circumstances".Jean-Michel Six, chief Europe economist at Standard & Poor's, said the Europeans were in no mood to rescue America. "There is monetary war going on. The ECB view is that Fed is a victim of its own mistakes and should pay for its past crimes. Frankly, they don't see why they should be cutting rates when inflation (3.3pc) is accelerating," he said.
There are now echoes of October 1987 when the German Bundesbank (and therefore Europe) refused to ease monetary policy, even though the dollar was in freefall and Wall Street was fragile. The spat was the backdrop to the Black Monday crash.
Note EU-Digest: The ECB is on the right track, the problems of the US economy are of the US her own making. If the ECB cuts the interest rates in Europe, inflation would rise and Europe's economy would also spiral into disaster.
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