By: Jeff Cox
The US exposure to the European debt bailout could be at least $50 billion, but the chance of taxpayers actually being on the hook for that appears remote… But one rule-of-thumb formula puts potential US exposure at $54 billion should the entire IMF loan fund be tapped.
The US also is exposed in currency swaps, where the Federal Reserve loans dollars to foreign banks in exchange for euros, which it then holds for a period that can range from overnight to three months. The currency is sent to central banks such as the European Central Bank as well as those in Japan, Switzerland and Canada, which in turn then direct the money to banks seeking the safety of the world’s primary reserve currency… The swaps, though, will make the Fed’s balance sheet grow to perhaps $2.5 trillion from its current $2.3 trillion, said Delta’s [Michael] Pento.
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