What a week for The Federal Reserve.
First we learn that they secretly loaned around $7.7 trillion taxpayer dollars to U.S. and foreign banks. As if this destruction of the dollar wasn’t bad enough, now The Federal Reserve is going to print up more money, making the dollar even weaker, to bail out European countries.
FRANKFURT, Germany — The central banks of the wealthiest countries, trying to prevent a debt crisis in Europe from exploding into a global panic, swept in Wednesday to shore up the world financial system by making it easier for banks to borrow American dollars.
Stock markets around the world roared their approval. The Dow Jones industrial average shot up more than 400 points. The stock market rose more than 5 percent in Germany and more than 4 percent in France.
The action represented the most extraordinary coordinated effort by the central banks since they cut interest rates together in October 2008, at the depths of the financial crisis.
But while the steps should ease borrowing for banks, they do little to solve the long-term debt problem in Europe, leaving markets still waiting for a permanent fix. European leaders gather next week for a summit.
The European Central Bank, which has been reluctant to intervene to stop the growing crisis on its own continent, was joined in the decision by the Federal Reserve, the Bank of England and the central banks of Canada, Japan and Switzerland.
And China, which has the largest economy in the world after the European Union and the United States, reduced the amount of money its banks are required to hold in reserve, another attempt to free up cash for lending.
The display of worldwide coordination was meant to restore confidence in the global financial system and to demonstrate that central banks will do what they can to prevent a repeat of 2008.