{"id":5221,"date":"2010-05-10T16:43:00","date_gmt":"2010-05-10T20:43:00","guid":{"rendered":"http:\/\/cfif.org\/v\/freedom_line_blog\/?p=5221"},"modified":"2010-05-10T16:43:00","modified_gmt":"2010-05-10T20:43:00","slug":"dow-surges-with-news-of-trillion-dollar-european-bailout-fund","status":"publish","type":"post","link":"https:\/\/cfif.org\/v\/freedom_line_blog\/5221\/dow-surges-with-news-of-trillion-dollar-european-bailout-fund\/","title":{"rendered":"Dow Surges with News of Trillion Dollar European Bailout Fund"},"content":{"rendered":"<p>After an erratic end to last week\u2019s trading filled with \u2018typos\u2019 and frozen stocks, the Dow and markets all over the world are rallying on news that the European Central Bank will create a <a href=\"http:\/\/www.foxnews.com\/world\/2010\/05\/10\/eu-sets-trillion-eurozoneimf-defense-package-protect-euro-disintegration\/\">trillion dollar fund<\/a> to buy government and private debt to keep lending liquid.\u00a0 With the help of the IMF and the Euro-using nations, the fund will prop up troubled governments.<\/p>\n<p>The response of surging stock markets does not mean this is a wise and sound policy.\u00a0 Investors merely feel the momentary comfort that there will be enough stability in the short term for money to be made.\u00a0 But this plan is little different from the $50 billion rainy day bailout fund batted around the debate for financial reform here in the United States, other than the sources of funding.<\/p>\n<p>Such measures create perverse incentives for market actors, whether a country like Greece, or private firm like Goldman Sachs, saying, \u201cGo ahead, and continue to take big risks.\u00a0 Don\u2019t worry about the consequences.\u00a0 We\u2019ve got your back.\u201d\u00a0 Why should Greece tackle its massive public sector union crisis?\u00a0 Why wouldn\u2019t Wall Street firms go out on a limb for a big potential gain, if there were a multi-billion dollar bailout fund to catch them if they fall?<\/p>\n<p>Markets are all about incentives.\u00a0 Rainy day bailout funds create the wrong incentive.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>After an erratic end to last week\u2019s trading filled with \u2018typos\u2019 and frozen stocks, the Dow and markets all over the world are rallying on news that the European Central Bank will create a trillion dollar fund to buy government and private debt to keep lending liquid.\u00a0 With the help of the IMF and the [&hellip;]<\/p>\n","protected":false},"author":11,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[1132,1256,1255,1141,786],"class_list":["post-5221","post","type-post","status-publish","format-standard","hentry","category-posts","tag-bailout","tag-banks","tag-euro","tag-financial-reform","tag-greece"],"_links":{"self":[{"href":"https:\/\/cfif.org\/v\/freedom_line_blog\/wp-json\/wp\/v2\/posts\/5221","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/cfif.org\/v\/freedom_line_blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/cfif.org\/v\/freedom_line_blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/cfif.org\/v\/freedom_line_blog\/wp-json\/wp\/v2\/users\/11"}],"replies":[{"embeddable":true,"href":"https:\/\/cfif.org\/v\/freedom_line_blog\/wp-json\/wp\/v2\/comments?post=5221"}],"version-history":[{"count":3,"href":"https:\/\/cfif.org\/v\/freedom_line_blog\/wp-json\/wp\/v2\/posts\/5221\/revisions"}],"predecessor-version":[{"id":5224,"href":"https:\/\/cfif.org\/v\/freedom_line_blog\/wp-json\/wp\/v2\/posts\/5221\/revisions\/5224"}],"wp:attachment":[{"href":"https:\/\/cfif.org\/v\/freedom_line_blog\/wp-json\/wp\/v2\/media?parent=5221"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/cfif.org\/v\/freedom_line_blog\/wp-json\/wp\/v2\/categories?post=5221"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/cfif.org\/v\/freedom_line_blog\/wp-json\/wp\/v2\/tags?post=5221"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}