That is a claim made on Monday by Robert J. Samuelson in the Washington Post, who argues that while he "had plenty of help, including from his predecessor, George W. Bush, and from top officials at the Treasury Department and Federal Reserve," his bailout of General Motors and Chrysler and his projecting "reason and calm when much of the nation was fearful and frazzled," and, oh so briefly, "He also championed a sizable budget 'stimulus'," not to mention his somehow generating a stock market boom were all crucial to the turnaround. OK.
Now I am usually denouncing RJS on this site, but I am not going to do so too much here today, even though I shall express some problems with this. For better or worse, I am more going to pick on my old friend Dean Baker, who is all over RJS on this, just dumping on him like we both usually do. But as RJS is a bit off, so is good old Dean, who spends most of his energy denouncing the TARP bank bailout, which RJS accurately notes was put in place by Bush, not Obama, so not relevant either way to a judgment on what Obama did or did not do (although he did not undo it, and did support it when Bush proposed it, so grant that to Dean).
Dean has long argued that TARP should not have been done and that instead we should have let the big banks fail, paying off depositers with FDIC funds, although those would have run out quickly. But then he also says Obama could have run a much bigger fiscal stim than he did, even though most think he got about as big a one as he could given the political views in the Congress at the time, and letting FDIC go bust would need to have been undone by Congressional action, which may or may not have been forthcoming. However, if depositers could have been paid, maybe we could have restructured the bankrupted parts of those big banks without too much turmoil or negative repercussions throughout the economy. But that is not at all certain, and we shall never know. After all, what happened in 1931 that turned an unpleasant recession into the Great Depression was indeed a massive financial collapse involving a global set of related bank failures, starting with the Creditanstalt in Austria in May and then spreading through Eastern Europe and then through Germany and France and Britain, finally to hit the US by the end of the summer, with the Fed doing nothing about it, and there also being no FDIC to save the depositers who lost big when their banks failed.
As it is regarding Obama and the banks, probably what he did that stabilized the financial system, and was not a financial gimme to the banks as TARP was (although from the standpoint of the taxpayers, TARP was a money maker, just barely), was the stress tests that happened in March, 2009, and went well, and seem to have coincided with a turning around of many markets and a lowering of major risk spreads in the economy. It is possible that this was at least as important as the fiscal stimulus (which the expectation of it kicking in also hit about that time) for helping to turn around the economy, although Samuelson said nothing about those stress tests, even though they were probably more important than the auto company bailouts he makes a big fuss about.
So, if neither RJS nor Dean really has it down as to what kept us out of a second Great Depression, and indeed that is what I am arguing, what was? Oh, that would be the actions of Ben Bernanke and his Fed colleagues at the precise instant of the Minsky Moment on the weekend of September 18, 2008, actions not widely known or recognized, but where indeed Bernanke showed his knowledge of the events of 1931 and acted to avoid that outcome. As the crash unfolded over the weekend, the most dangerous part of it came in Europe, where several of the biggest banks, including Deutsche Bank and BNP Paribas, were in danger of collapsing after the AIG branch in London went down. The ECB was under pressure trying to buy up their stuff made junk by the AIG collapse and was failing to do so as a crash of the euro began, with European (and other) money rushing into the safe haven of the US dollar (this involved similar events in some non-European nations as well).
The decision was made to put on the Fed balance sheet in swaps, where one can find this in the historical record with it labeled as such, about $600 billion of this (mostly) euro junk that the ECB was having trouble absorbing. This action after that weekend stabilized the euro and ended the immediate crisis, which indeed threatened a full-scale global financial meltdown a la 1931. These balances were then quietly rolled off and sent home after the crisis ended over about a six month period to be replaced by US mortgage-backed securities (MBSs). I first heard of this from the inimitable Perry Mehrling, and one can find a pretty good account of it in Neil Irwin's The Alchemists, but very few people know about it, with most like Dean and RJS getting all worked up about such secondary matters as TARP and the fiscal stimulus. Without that weekend save, these would have been flying against a much deeper crash and plunge into depression than they were.
BTW, it is even harder to separate out what was responsible for what as the ending of the rolling off the Fed balance sheet of all that eurojunk came about the same time in March,2009 as did the stress tests and the passing of the fiscal stimulus. Good times would be coming one way or another, even if it would take a long time given the depth of the fall.
Why do so few people know about this? Well, this was one of those deals involving confidence, or the fear of losing it. Folks at the Fed, who got very little sleep on the weekend of Sept. 18, 2008, did not want to aggravate the crisis coming out of Euorpe (which in turn was triggered by events in the US), so they wanted as little publicity as possible about the fact that there was such a serious world-economy-threatening crisis, as well as also not wanting to let people know that they were doing anything about it, with the extremely bad condition of the assets the Fed was putting on its balance sheet to be especially not made known, buried under the obscure label of "currency swaps." And the fact that their actions were successful, arguably then reinforced later by various actions discussed by Samuelson and Baker, led to those assets becoming less toxic over the next few months and thus able to be quietly sent back to Europe where they came from.
Needless to say, neither Obama nor Bush had doodley-squat to do with those events or the decisions by the Fed that probably were more important in saving the world from a second Great Depression than anything done later by them or anybody else. Credit should be given where it is due on this.
Addendum, 1:30 PM, Dec. 21:
A couple of further remarks. Much of what has Dean Baker and many others annoyed about TARP was that a bunch of bad guys got away with it. He and many others, including many who supported Bernie over Hillary and some who voted for Trump over her as well (even though Trump is dumping on them by appointing Goldman Sachs types and other billionaires to his cabinet), have been unhappy that TARP saved the behinds of these big CEOs, whose Big Four banks look now "too big to fail"and sitting very pretty. (Probably the stupidest thing Hillary did was giving those paid speeches to those Wall Street fat cats). I see two related but separate issues here, none of them having to do with the Fed swap bailout of Europe,and a third further unmentioned but related issue also.
One is this matter of punishment and retribution. So, I regret indeed that Obama did not have the DOJ or somebody go after some of these high level CEOs. Many of them clearly guillty guilty. guilty. There was a danger this could have turned into an excessive witch hunt, but as it was a bunch of guilty people got off very scot-free, in some cases a lot richer than they started out as.
I suspect that the decision not to go after them was related to the decision not to break up those biggest banks. That in turn reflected a policy coming from the Fed and predating the full crash, that it was preferable to have larger banks take over smaller failing ones rather than let those smaller one outright fail. Some of this may have been a matter of trying to prop up confidence, e.g. Bear Stearns, although some of it may have also been wanting to avoid putting the limited FDIC funds in danger by having to deal with too many bank failures. Of course, this led to the increasing size of these behemoths that bought up these banks,with some of them suffering as a result, still not fully digesting what they bought, with Bank of America especially sticking out on this. There certainly is a case now for busting up some of these big banks, especially now that we are way out of the old danger zone. However, at the time, even Dean admits that there would have been a major decline if the banks had all been left to fail, not just Lehman, with his invoking a not-likely-to-happen World War II level fiscal stimulus to overcome the aftermath of that.
The third issue, not mentioned by either Samuelson or Baker,although Dean has written about it in the past and is fully aware of it, is what to do about all the homeowners who ended up with underwater mortgages, at one point as many as about a quarter of all mortgage holders. These people clearly took a big hit, and RJS vaguely mentioned them when he referred in his article to "asset value losses," which clearly went beyond the stock market. This matter is still a hangover from the Great Recession, with many people still in this underwater condition, which is most depressing. Their condition of course was related to the problems in the banks and financial markets more broadly, but has persisted even after the bank crisis settled down. At times Obama and others made noises about doing something for these people, but there was always political resistance and not just from Republicans. Such moves were basically unpopular because of annoyance by mortgage holders who were not underwater, many of whom saw those in the underwater situation as being personally responsible for their own financial problems. Why should the rest of us bail out these fools who took out overblown mortgages on overly highly priced real estate? I cannot answer that one,but I note that the failure to bail these people out, who arguably were more deserving than the big banks, has been a major drag on the recovery and still is.
Barkley Rosser
21 comments:
Just finished "The Making of Global Capitalism" by Panitch and Gindin and it's all in there too.
I don't think this was the authors' intention, but the book made me kind of admire the Treasury Department's competence (Europe not so much).
You mention the year 2001 twice here, is it safe to assume that is a typo?
More critically, I think you miss what I get out of Dean Baker's posts- the bank bailouts provided an extremely valuable asset in the name of the U.S. government (and through that all U.S. citizens and residents) for nothing more than a possible return to the previous state of affairs. You say the Fed heroically offered 600,000,000,000 dollars of swaps. I say fine but we should own those banks as a result.
Except that we still are in depression. Sure there is a little growth happening, but the level is far below where it should be. The real question should be, why did the Bush/Obama admins manage the economy to a new depressed lower equilibrium?
To have such a financial crisis in the first instance revealed a fundamental problem with global 'accounting'.
At the beginning of 2008 - and all through the year, in fact - alarm bells were ringing about the reported dramatic decline rates in global oil production (estimated to be between 6.7% and 8.6%). Governments around the world had failed to lead their nations away from the use of fossil fuels, despite ongoing warnings of 21st Century depletion.
Two years previously Jonathan Overpeck, a University of Arizona researcher helped lead a climate study that found "rising temperatures are on track to melt much of the Arctic ice, including the Greenland Ice Sheet, plus melting and collapse of parts of the less stable Antarctic Ice Sheet [and that] "Vietnam, Thailand, Indonesia and Cambodia, along with China, could suffer sharp cuts in their gross domestic product as a result of a rise in sea level..."
Ten years previously George Soros published 'The Crisis of Global Capitalism' in which he warned that personal and national collateral was being destroyed in the financial markets associated with the absence of moral restraint by leaders and a general deficiency of social values. The risk management strategies employed in banking, he said, were increasing volatility of the market and increasing financial profits.
2008 was just another year in which the monetary authorities had intervened to stop collapse in the international financial system. Other years in which this happened were: 1982, 1987, 1994, 1997, 2001, 2007, 2009, 2010, 2011, 2012..."
Under Obama the fracking industry really took off and the EPA in the US was found to have been under-estimating the emissions from this industry by somewhere between 100 or 1,000 fold. Climatologists concluded that they could no longer be honest about the 2 degrees C limit in global temperature rise. It could no longer be reached. And to get to the new limit of 4 degrees C by 2100 meant an immediate quadrupling of our current decarbonisation rate and the richest 1-5% of global citizens would have to accept a 40% reduction in the energy consumption today and a 70% drop in energy use by 2020.
But even with another TARP bailout and a 4 degrees C future, stability is very unlikely.
No Obama did not avoid another Great Depression. It just hasn't happened where we are yet.
I would also credit another program (though I don't know its impact relative to the Fed's entry into swaps) -- the FDIC's Debt Guarantee Program. Providing an insurance backstop to all that unsecured debt allowed companies to avoid a significant amount of liquidity stress that could otherwise have resulted in asset sales into a depressed market - i.e., fire sale.
Jerry,
Thanks for catching my mistake on the years. The US made the swaps with central banks, not directly with the foreign private banks. Not going to own those foreign central banks, and the swaps were off the balance sheet quickly anyway.
john,
No, we are not in a depression now, although arguably Greece and some other nations are. US growth has been better than most of Europe's, with generally slower global growth going on out there. The source of that is much debated, but I think it has little to do with policies of either Bush or Obama.
Myrtle,
The crisis started much earlier than the Minsky Momnent of September, 2008 when its financial aspect came to a head. The initial decline was when housing prices began to fall in mid-2006, with this manifesting in various derivatives and other financial markets as early as July, 2007. Certainly a whole lot of other stuff was involved as well.
Herman,
The Fed rolled out a whole bunch of alternative financing vehicles in late 2008 that were later rolled back in, but the largely-undiscussed biggie was this currency swap stuff with the ECB.
Yes Professor, the swaps were provided to central banks in other countries and we aren't going to own those nor do we want to. But isn't it reasonable to assume that those swaps were made so that those central banks could provide a backstop for U.S. dollar liabilities of European private banks? My argument is not invalidated just because there was some middleman between the grantor and the grantee.
And the same (and perhaps more) goes for U.S. based banks. Dean Baker is right when he says we provided billions of months worth of food stamps to some of the wealthiest people in our country. Just to get back to the same situation we were in before, with in many cases the same arrogant pricks in charge of their should of could of would of been insolvent enterprises. And I don't care that they like to point out that most of the "food stamps" were returned unopened. They would have been toast without the guarantee of our government.
And I apologize for the rant and I hope you realize it is not directed at you.
Errr, I did not see the addendum to your post before writing the last comment. It is likely that my previous comment would not have been written. Please keep in mind the last sentence of that which begins with "And I apologize"
TARP did not bailout "bankers" but bailed out "savers" who lent money to the bank rent seekers who did any loan deal possible for the rents generated.
And most of the money lent recklessly to get the excessive rents driving the seven plus non-FDIC banks came from the shadow banking savings depositors: retail money market funds.
I remember the debate over retail money market deregulation in the late 60s early 70s, specifically on the the first such fund to take retail savings deposits, with just 3 day delay on withdrawal of funds restricted to once a month.
Friedman and others argued such funds would never face insolvency, never face bank runs, never face asset write downs, never lose money for depositors, precisely because they were not FDIC insured.
Thus Reserve Primary fund is the first absolutely safe savings account, and also the fund that broke the buck and triggered a bank run on money market funds which we were told in 1970 could never happen because non-FDIC savings account would be much safer than savings at FDIC banks.
The bank run was stopped by FDIC retroactively insuring shadow bank deposits, plus the Fed extending credit to these funds on terms equivalent to those to Fed member banks.
These policies were crafted, supported, implemented by people who were Obama advisor's in 2008, and who then joined the Obama administration.
Note that TARP was invented in 1990 to bailout S&L savings depositors whose savings had been lent out in bad loans, and the FDIC equivalent ran out of money with S&Ls closing so fast they could not be charged fees to recover as FDIC has done. The S&L savers were bailout by FDIC taking over.
Clearly, the author needs to listen to the lecture on banking by George Bailey to understand who is saved by so called "bank bailouts". George would be happy to see the bank go under, but he could not screw over the common people who put their savings in the bank.
To say the banks should have failed and gone bankrupt is to say that tens of millions of people should have lost some or all of their savings. You must be cheering the working class in Italy who are losing their savings thanks to the EU ECB no "bank bailout" policy.
Mulp, I have no problem with the Fed and the government (same thing) insuring people with deposits in failing banks. That is different from bailing out the banks themselves. For instance, the government could have structured a bailout by offering to purchase as many shares as any bank needed to cover their liabilities at a price of 1 cent per share. That way all liabilities would be covered, peoples savings would be guaranteed, and the bank would in effect be owned by the government.
Mulp,
Yes, the FSLIC went bust and was never recovered. FDIC would have gone bust if Baker's proposal went through. If it were not refinanced then indeed bank depositers would lose. However, bankers do lose in a bust. They lose their high paying jobs. Even a breakup of big banks, which some support, would probably result in the top people in the big banks ending up in smaller banks with lower salaries, if not on the streets unemployed or in jail.
To Jerry,
Of course throwing those bad CEOs in jail would not necessarily mean that more money would go to food stamp recipients or even the damaged underwarer mortgage holders.
BTW, if you are the J.B. who inhabits the state capitol in Sacramento, I met you once, although you probably do not remember. Econospeak's Peter Dorman was there too, and we had quite a long conversation, although I do not remember precisely about what. Bujt I remember that you were wearing a white turtleneck. I used to own one of those, but my wife tossed it because it got dirty too easily.
No, I am a not at all famous Jerry Brown who lives in Connecticut. I think I did vote for that Jerry Brown in a presidential primary once. He may have even won in my state. I would be interested in his view on these events.
SWL speaks, where perhaps different definitions are appropriate:
What do we mean when we say the economy is recovering from a recession? Do we mean it has started growing again, or do we mean it is returning to its pre-recession trend? Brief research suggests there is no standard definition, but Wikipedia is clear it is the latter:
“An economic recovery is the phase of the business cycle following a recession, during which an economy regains and exceeds peak employment and output levels achieved prior to downturn. A recovery period is typically characterized by abnormally high levels of growth in real gross domestic product, employment, corporate profits, and other indicators.”
The second sentence is crucial here. All economies grow on average: they have a positive trend growth rate. An economic downturn (or worse still a recession) involves the economy dipping below trend (or in a recession not growing at all). Typically whenever that has happened in the past, most economies make up for the growth they lost in the downturn, by growing more rapidly than trend once the downturn is over. This had certainly been true for the UK. We expect economies to grow over time because of technical progress, so it seems almost obvious that a recovery must involve above average growth until we return to something like an underlying trend.
Imagine a 5,000 metres race. Suppose an athlete trips and stumbles, leaving the main pack behind. If 5 minutes later I said the athlete was recovering, would you think this meant that they were getting back to their previous pace but still well behind the main group, or that they were getting back in touch with the main pack? I suspect you would think it meant the latter, and you would call a complete recovery when they were back within the main group. If you think about the main group as the underlying trend path of the economy, then a recovery in growth means getting back towards this trend path.
For this reason I would define a recovery from recession as above trend growth, and I think most macroeconomists would do the same. Here is recent quarterly growth in UK GDP per head.
John,
Well, in third quarter US GDP was growing at well over 3%, above trend. So, so much for that. As near as I can tell, the main macro variable where the US has not recovered to its former condition is in the employment rate, with the labor force participation rate still several points below where it was. What is behind that has been a major point of discussion, and I do not have a definite answer. But it may be a permanent shift, which would make it meaningless to insist that we are still in a recession based on that. It may make it that we are permanently in recession, which pretty much makes the term meaningless. What will we call it when we next see a decline in GDP, which surely we shall at some point, to distinguish it from this permanent recession?
Sorry, not going to go along with this, although it may be true psychologically, which is part of why Trump won, even if he did not win the popular vote. Certainly in the 1930s, most people think of most of the decade as being "in the Great Depression," even if the economy started growing again in 1933, albeit with a secondary decline in 1937, the event for which the term "recession" was initially coined.bb
Another group that probably feels still in recession is those homeowners with underwater mortgages. However, I must note that they would feel this way even if there had not been a recession brought about by the collapse of the housing bubble, as it is the latter that was responsible for their current condition, not the recession that followed, per se, even if their condition helped slow the recovery from that recession.
I must note that this relates to part of my frustration with Dean Baker's latest commentary on all this, especially given that he was almost certainly the first and most perspicacious, person to call both the housing bubble itself as well as what it would lead to. So I am disappointed that he seems to have missed, or perhaps dismissed, what went down at the Minsky Moment that he called so clearly and so early, and him definitely a deep student of the late Hyuman P. Minsky.
I note that he might respond to my defense of Bernanke and the Fed on that weekend by pointing out, as he has on numerous occasions accurately, that they did not recognize or do anything about the housing bubble earlier, when they could have. He is right on that, and Bernanke and his fellow Fed people do deserve the criticism he has delivered on that point. I shall only note on that point that the one person at the Fed during the period of the housing bubble who seems to have warned about it, at least at some points, was Janet Yellen, who was president of the San Francisco Fed back in 2005 and who was very aware of the housing bubble in California and warned about it in Fed meetings, only to be basically ignored (Greenspan was still in charge at that point in time, not Bernanke).
I'm not going to deal with all of this, but I'll just make some fact corrections. The FDIC had at the time some $50 bn in its insurance fund, but it has, as per its authorizing legislation a $200 bn automatic line-if-credit with the Treasury Dept. (Sheila Bair want to resolve Citigroup, but other regulators refused and she had only very partial jurisdiction, since much of its depositary base was foreign and not covered by the FDIC).
Someone above noted that, after letting Lehmann Bros. fail,-( and why was Dick Fuld at least not prosecuted, on account of "repo 105"?)-, the Fed failed to back stop money market funds, where the shadow banking run began. They only corrected their mistake after $500 bn drained out the following Thursday, when, in a panic, TARP was first proposed. ANd then TARP was initially a completely unworkable proposal to buy toxic assets directly from the banks, rather than increasing their capitalization, as was eventually done. But to say that the U.S. gov. made money in the end in manipulated nonsense, since it ignores the risk-rated discount involved, making it actually a huge subsidy for the mega-banks without any corresponding consequences or accountability.
I have to go out now. Will continue later.
As to the Obama fiscal stimulus, Christie Romer initially calculated in a memo that $1.8 tn would be required, which Larry Summers rejected, at which point she lowered it to $1,2 trillion, which estimate perhaps Obama never saw. In the event, the House passed a $900 bn bill, which Obama then lowered in negotiations with Sen. Collins (R-Maine) to $790 bn, in an effort to procure Repub. support, which never came, (an early instance of his tendency to negotiate with himself and thus weaken his own hand). The part that was stripped out was aid to the states which speaks to Obama's economic ignorance, since states are balanced-budget constrained and most of the $400 bn annual stimulus was counter-acted by state spending contraction, amounting to little real fiscal stimulus at all.
Computer problems, so I had to shut down.
As to the meme that the U.S.$ rose in the midst of the crisis because the U.S. $ is a "safe haven", the contrary is the case. A lot of U.S. entities/agents, needed to repatriate $ from abroad in order to cover their positions, (since in such a severe financial crisis, good positions need to be liquidated to cover bad ones, such that both good and bad "assets" spiral down together), while at the same time a lot of foreign entities/agents had invested in $ assets, which had been peddled world-wide, so foreign banks needed $ to cover their positions. Which was the significance of the $ swaps the Fed set up. The sudden high demand for $ resulted somewhat paradoxically in the sharp $ appreciation, but not as a sign of strength or safety. At the same time I don't think the AIG CDS had a lot to do with the melt-down, since they were "super-senior" or AAAA tranches on the bank's books, and they only contributed to the heightened uncertainty about valuations. The real core of the crisis was the melt-down in the repo market, where tranches that might have been pledged at a 10% haircut suddenly couldn't fetch anything at a 90% haircut. But then the Fed bailed out the AIG CDS at 100% on the $, when on a market-based negotiation they might have fetched less half that. IIRC GS alone received $13 bn, another back-door cost-free bail-out for the mega-banks. Certainly the Fed providing foreign CBs with $ to help them unwind such bad positions was absolutely necessary under the exigent circumstances, but much else that was done or not done was not. And the U.S. $ rise was a perverse effect of a crisis that was largely made-in-the-U.S.A.
As to the U.S. mortgage crisis, the Obama admin. completely failed to deal with it. The HAMP program was a deliberate fraud upon the U.S. public, when household debt had risen to 100% of GDP. Geithner in his memoir spoke of "foaming the runway". But that wasn't really news, since he had used the same phrase in a meeting with financial bloggers in 2010. What he meant was stringing out the foreclosure rate, so that banks could afford the loses, not helping out ordinary households. In turn Fed QE arrested the decline of house prices at 32% (when 40% would have been the realistic value), allowing house prices to subsequently rise through bottom-feeding Wall St. buy-outs of foreclosures, rather than instituting a program to reduce mortgage debt or alternatively to convert foreclosures into rentals for incumbents, (both of which Dean Baker suggested at the time), and thereby save households rather than mega-banks, (and thus restarting household spending to revive the economy). But then the banks would have had to have been "forcibly" recapitalized by the Fed, in place of handing them free money via QE. Choices were made, in accordance with prevailing neo-liberal doctrine/power relations... And now the ratio between house prices and rental rates has been inverted, from the state before the crisis.
Finally, most of the U.S. economic growth that has been recorded since the official end of the recession in June 2009 has been due to the fracking boom, which ironically began in 2008, (probably due to technical advances in horizontal drilling). All that QE money had to go somewhere and, other than inflating bubbles abroad, it went to investment in oil and gas. Prior to that 2/3 of U.S. oil had been imported, but that was cut in half, so -1% of GDP became +!% of GDP. And investment spending has collapsed everywhere but in the oil and gas sector, financed by cheap funds from the Fed, despite the fact that at least in the gas sector, the price has been below the cost-of-production since the beginning of 2012, so it's been running on fumes/cheap money since then, which is coming to an end. Despite the fact that in terms of physical efficiency, EROI, it's poor in returns, not to mention all the other environmental "externalities".
Heck of a job, Brownie!
As to Trump, it's been noted that his median voters are above median income. But there is a strong correlation between counties that voted for him and levels of mortgage debt in those counties: i.e. many ostensibly middle-class people have little equity in their homes and probably are underwater in their mortgages, fearing falling out of the middle-class. (For his working-class voters, they've probably already had foreclosures). So what's so surprising about a socio-pathic conman/clown-prince taking advantage of the situation, given the abject failure of the DLC establishment? I don't think the paranoid/hysterical blaming of Putin fits the bill.
John,
No disagreement about the path of negotiations over the fiscal stimulus, although a lot of participants, notably Summers, claim the Congress was not going to go for those earlier higher numbers, which is why they were scaled back before it got sent to Congress. Would it have been bigger in the end if the original $1.8 trillion had been sent over? Maybe.
On the matter of the dollar, I think you are off on timing. The matter of the dollar surge and euro collapse was something that was happening during a period of days, not over a period of time. It was a full blown crisis, which is why nobody went to bed at all over the the weekend of Sept. 18, 2008 at the Fed. The currency swap setup stopped the slide of the euro and the rise of the dollar almost immediately so that it is all but invisible in the data if you look back. But that is what happened.
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