Bernanke’s Dollar Swap Euro “Stimulus”

Here’s a letter I sent to The Wall Street Journal:

In “Central Banks Take Coordinated Action” (Nov. 30), Mr. Sparshott and Mr. Hilsenrath rightly point out that the Fed’s slashing of dollar swap interest rates by 50 basis points “doesn’t address the fundamental problems related to European government debt that now plague the financial system.”

By offering yet another wooden plank to the drowning Euro, Bernanke merely prolongs its inevitable destruction. Bad debt must be liquidated, not preserved. Protracted global recession ought to make that lesson clear.

European governments must be allowed to default so they can undergo the painful but necessary process of reining in bloated public sectors and deregulating rigid markets. Helicopter Ben showering greenbacks over Paris and Rome provides the opposite incentive. He only assures that the Eurozone’s fall will be even harder.

Matthew Melchiorre
Adjunct Analyst
Competitive Enterprise Institute