Americans, You Are Now Bailing Out Europe

NEW YORK (TheStreet) -- Repeating a lie often doesn't make it true. Yet the world's political leaders and financiers constantly refer to cancerous, unpayable debt as a "liquidity crisis."

Enough with the lies.

If you earned $32,000 a year but spent $51,200 -- having already accumulated $208,000 in debt -- your ability to function is completely dependent on others' willingness to lend you money. When creditors cut you off, are you facing a "liquidity crisis"? Or are you simply broke?

This happens to be the exact financial situation of the United States, pro-rated. However, unlike an individual, countries are able to print money to satisfy debts. And now we're printing for the world.

The coordinated "central bank liquidity effort" is little more than the Federal Reserve -- a consortium of the very people that took the world to the precipice of collapse -- offering up U.S. dollars (which the Fed can create out of thin air) to be doled out to troubled European financial institutions (at the discretion of the European Central Bank).

Yes, the Federal Reserve charges interest to make those dollars available. And, yes, the Fed holds euros (or euro-denominated securities) as collateral. Finally, the dollar swaps are short term only.

But the question remains: Why do the world's banks need U.S. dollars in the short term?

Europe isn't facing a liquidity crisis. The world is facing a structural solvency crisis in which businesses, governments and individuals have all borrowed money -- and made promises -- that cannot be repaid unless more money is printed (or, more specifically, until more credit is issued).

This type of system can destroy the standard of living for the 99%, while providing exploitative opportunities for a select few. Never forget the "starving billionaires."

At best, the Federal Reserve is putting out a global fire for a few months (maybe days or weeks). This is nothing more than a shell game, akin to rearranging the deck chairs on the Titanic. The underlying problem isn't being addressed.

At worst, the Federal Reserve is making U.S. dollars available to foreign institutions while the general public shoulders all of the inflationary risk. And if the euro does fall apart in the meantime, it's the average American who is stuck with worthless collateral.

-- Written by John DeFeo in New York CityFollow @johndefeo

>To order reprints of this article, click here: Reprints