Six Central Banks to the Rescue: Timing Couldn’t Have Been Better for the Eurozone

Now this is what you call perfect timing…

Last Wednesday, on November 30, 2011, six world central banks cut the interest rate at which banks can borrow U.S. dollars. The cost for eurozone banks to borrow immediately dropped and pressure temporarily came off stressed eurozone banks (see Why Michael’s Feeling Vindicated this Morning).

The very next day, Spain and France sell $8.1 billion in government bonds. But hold on, there’s more…

Today,France is trying to sell more bonds. Wednesday, it’s a Portugal bond auction. Next Monday, it’s Italy’s turn to sell bonds, and, from that date on, from December 12 to December 29, either Italy, France, Spain, Greece, or Portugal will be selling government T-bills or bonds every single business day…a total of 13 government T-bill/bond auctions for the eurozone.

Talk about perfect timing! If the Fed and the five other major central banks didn’t announce on November 30 that they were effectively boosting the money supply, how many more billions in interest would the troubled eurozone countries have had to pay on their bonds?

If you don’t believe in coincidences, the question is: what’s really going on here?

Central banks see the debt crisis in the eurozone deepening and are insuring that the system is flush with cash, so the entire system doesn’t freeze like it did during 2008. Yes, this is an action to stop credit from seizing up in the eurozone and spreading to America, but it’s just more “kicking the can down the road.” The structural problems of extreme government spending and debt, zero economic growth, and high unemployment are not being addressed, just kicked down the road some more.