Central banks unite to help Europe
Flags fly over the Federal Reserve Building on Dec. 16, 2008 in Washington, D.C.
Kai Ryssdal: And the first thing you need to do is forget everything you've heard since this morning about the stock market and central banks. Because yes, the world's major central banks did announce a joint move to ease the worsening credit squeeze in Europe. And yes, traders practically the world over took that news and ran with it.
But really, when the Fed and the European Central Bank basically start giving away dollars, something's going on. Step number one today is understanding exactly what the banks did. Marketplace's Sarah Gardner starts us off.
Sarah Gardner: As Europe's debt crisis intensifies, lending is drying up. Banks there have had more trouble getting financing, including in dollars. Today's emergency move by the Fed and other central banks makes securing those greenbacks easier. But investment strategist Hugh Johnson says the larger aim was boosting confidence in Europe's financial system.
Hugh Johnson: It's a very bold move on the part of the central banks and it shows, that everybody recognizes that Europe has a problem.
A problem that includes European banks increasingly reluctant to lend to each other. That's because they're saddled with the risky debt of countries like Italy, Greece and Spain.
Susan Fulton, president at FBB Capital Partners, says Europe's facing the same crisis the U.S. did in 2008: a credit crunch. She suspects a number of big European banks were in need of life support.
Susan Fulton: What this really did was give the European Union a blood transfusion for a patient that's critically ill and would probably have died if this hadn't happened.
That transfusion may resuscitate lending, but it doesn't cure Europe's debt crisis disease. Simon Johnson is former chief economist at the International Monetary Fund.
Simon Johnson: If you just treat the symptoms, just try to bring down the fever, without dealing with the underlying cause of that fever, that could turn out to be not particularly helpful.
European leaders will meet next week to try, once again, to tackle the continent's debt problems.
I'm Sarah Gardner for Marketplace.