Europe Goes Big

A mere five days ago – it seems like ages – this blog was incredulous when the Europeans approved a Greek financial rescue in excess of 100 billion euro (just a few weeks ago, they were saying Greece didn’t need help) . In the interim, markets have blown the entire enterprise out of the water, and this evening we have the announcement that the EU responded with a $950 billion (750B euro) package for the entire eurozone. Apparently Trichet has pulled his head out of the sand and, taking a page from the Bernanke playbook, will venture into the QE business.

Meanwhile, Marketwatch confirms the rumor from Zero Hedge we reported earlier – the Fed (along with other central banks) has brought back the Dollar liquidity swaps to help the ECB get through the interbank money market crisis. We said then that if it was true, things were much worse than anyone was admitting. Looks like that was the case.

With some $320 billion of this new funding slated to come from the IMF, it appears US taxpayers are in for something in the neighborhood of $125 billion.  It seems market observers expect US stocks to open strongly on Monday. Maybe; we’ll see soon enough. This kind of thing doesn’t happen often enough to make for probability based forecasting. Be very careful, the markets can be rough in normal times. This is far from normal.

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