Has the Fed saved Europe?

The US Federal Reserve has intervened to ‘rescue’ Europe’s debt-ridden economy. But what exactly has the Fed done – and will it work? Tim Bennett explains.

Related videos

What is quantitative easing?
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  • JF

    Thanks for the interesting and very worth while video, it cuts through to the facts of what is happening in the euro crisis and is presented in a way that is easily understood, worth while watching!

  • Tim

    For anyone who wants some related content, my videos “what is operation twist”, “what is quantitative easing all about?”, “what is a swap?” and “how do governments go bust?” may be useful. Tim.

  • beachcaster

    Tim a big thankyou for your videos…really useful.

    You pitch them just right.

  • George

    Probably a stupid question.
    If the watch is a ‘crappy’ asset why would the pawn broker (Fed) be prepared to advance a loan against it in the first place.?

  • MartinJG


    Love your videos. Informative and entertaining. Great delivery. Touch of the Michael Palin there!

    George beat me to it re collatereal for pawnbroker. I realise you were using this as an illustration but there is obviously a clear relationship with solvency (net worth) hence the the question mark hanging over ‘value spots’ in Europe. Busisness is business and will sink or swim. Problem is really the age old problem. Politicians. Just too much baggage.

    Look forward to the next installment.


  • Brian

    I enjoyed and understood the video until the final part regarding the pawnbroker- watch analogy. I had understood that the ECB was giving the Fed euro currency as collateral in the swap. The banks in Europe are stilll stuck with the debts owed by sovereign governments.

  • Ladysaver

    Re the pawnbroker and the watch – an analogy might be that the guy who went to the pawnbroker needed $100 right now to pay interest on his debts, and the short term loan let him to do it – short-term liquidity crisis fixed (for now). But he still has debts and may not know how he’s going to go on paying the interest. Normally he could sell some assets to reduce his debts. Like sell that watch and pay off the car loan. But while his watch might do as collateral for $100, neither it nor any other of his assets are worth enough to pay off his debts. Insolvency is when you could sell all the assets you’ve got, and still owe money – i.e. you’re bust. Remember that all those ‘assets’ on banks’ balance sheets are what you and I would call debts, e.g. money they’ve lent to governments. If you’re a bank and lots of your assets are PIIGS government bonds, you’re in the doo-doo.


    Has the Fed saved Europe ? The answer is ‘NO’. It is only a matter of time before Europe collapses under an ever increasing mountain of debt. The politicians are deluding themselves and buying more time to delay the inevitable.

  • Poldark

    Tim did not explain where the Fed is getting the dollars from.
    Did they print the money or was it’sterilised ?

  • Tim Bennett

    Brian – I suppose my point is the Fed has stepped in and offered a sort of pawnbroker of last resort facility. It’s like me and the pawnbroker agreeing to a loan of £200 on a watch that we both know is worth much less. Why do it? These are desperate times…..

  • smlaing

    Because the money was printed so cost the FED………Nothing!

    They virtually gave away something that cost them nothing and it return got an asset worthing a little more than nothing!

  • Tim Bennett

    smlaing – agree, the whole purpose was to boost confidence at minimum cost. Short term it has worked but markets will soon realise that none of the underlying issues have gone away.