So now we have reports that Federal Reserve Chairman Ben Bernanke has told Senate Republicans behind closed doors that he is "very concerned" about Europe, but is backing away from speculation that the Fed could bail out the struggling monetary union. That means no extra money for the International Monetary Fund.
Bloomberg reports: "Senator Bob Corker, a Republican from Tennessee, said Bernanke made it 'very clear' in closed-door comments today the central bank doesn't intend to rescue European financial institutions. Lindsey Graham, a South Carolina Republican, said Bernanke told lawmakers that 'he doesn't have the intention or the authority' to bail out countries or banks. Both senators spoke to reporters after leaving the one-hour session at the Capitol in Washington."
Goldman Sachs is warning that the collapse in euro zone economies will spread to America and will cut US growth. In fact, it will spread all over the world.
The reality is that the Fed is politically limited in what it can do for Europe as US lawmakers are resisting efforts to contribute more to the IMF to help Europe. In other words, US politicians are saying we have to teach those Europeans a lesson even if it means cutting our own wrists. This is a dangerous game of chicken with the global economy.
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