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Government Gives $9 Trillion to Banks

Never before have the world’s central banks sent so much money sloshing through the global financial system.

From slashing interest rates and buying government debt to dangling cheap loans to banks and taking on their risky assets, central banks have taken extraordinary steps since the 2008 financial crisis to nurse the international banking system back to health.

Over the past 3½ years, the central banks of the United States, Britain, Japan and the 17 countries that use the euro have pumped out so much money that their balance sheets have reached a combined $8.8 trillion. That’s a record, by far.

The infusion of money has eased borrowing costs and raised confidence in banks, governments and companies.

Critics counter that the flood of cash has made the risk of a damaging inflation spike down the road more likely. And they point to rising prices for oil, food, gold and other commodities as evidence. They warn that the easy money may allow investors to bid stock prices up to dangerous heights.

They also note that the crisis led central banks to accept high-risk investments that banks want and need to unload. These investments have been collateral for money that central banks gave financial institutions.

Fact is the central banks must eventually unload the trillions in assets on their books. That carries risks, too.

A second round of low-cost loans that the European Central Bank gave banks Feb. 29 is the latest financial injection. The ECB issued $712 billion in loans to 800 banks, on top of $658 billion it lent 523 banks in December.

via Central banks’ $9 trillion is global economic lifeline – USATODAY.com.

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