Here’s an excellent interview with former Dallas Fed Vice President Gerald O’Driscoll in which he exposes the Federal Reserve’s recent dollar swaps with the European Central Bank for what they are: a continued bailout of Europe’s banking system by the US central bank. It’s unusual to see such forthright honesty about what is going on from someone formerly associated with the central banking system. Mr. O’Driscoll does not mince words or shy away from calling a bailout a bailout.
The subject at hand is the recent arrangement between the Fed and the ECB to swap dollars for Euros. According to O’Driscoll this indirect loan method was necessary because the Fed was embarrassed by the court upholding of FOIA (Freedom of Information Act) requests in which the Federal Reserve was forced to reveal their direct bailouts of foreign banks and corporations. In this case there is an extra layer of obfuscation as dollars are provided to the ECB and the ECB then engages in the bailouts.
The important takeaway from all of this for precious metal investors is that it is clear that, one way or another, the central banks are going to attempt to devalue their way out of this mess through the creation of new money and credit. Keep an eye on the balance sheets of the central banks. As long as they are continuing to to go up then the answer to the ultimate question of deflation or inflation seems very clear. And as you can see from the graphs below the monetization of debt and near worthless assets continues unabated.
