The Magic of Leadership

The markets have calmed down as there is a plan to solve the European debt crisis. Under the program, the Fed provides dollars requested by the ECB. The ECB distributes that money to commercial banks in Europe. There's no cap on the dollars the Fed can provide. The Fed will receive euros to hold in return for the dollars and will get interest payments on the dollars it provides the ECB. The Fed's exposure will be to the ECB, not to the commercial banks. And the ECB will be obligated to repay the Fed in dollars.

What is the ECB - European Central Bank? It is the weak financial arm of the powerless EU. Why they dont use euros instead of dollars? Probably because Germany fears inflation of its currency. The risk of inflation is then transferred to the US dollar. The people has more faith in the dollar than in the euro.

The concept is that there will be more liquidity and interest rates will fall. Greece, Italy and others will be able to pay back gradually their debts if it stops growing at the usurious rate of today. The concept is, in other words, religious. If we all believe in God's goodness and that it will be all right, it will. If we doubt, we surely are all going to hell. It all comes down to changing the people's state of mind. Like Will E. Coyote who can walk in the air while his illusion sustains him. Magic.

Exactly like in wars. When we all have faith in God favouring our side and we are convinced that we are going to win, we win. When there is a panic, massacre ensues. Basically it all depend on faith and leadership.