From AL JAZEERA:
…Fortunately, the Fed has the tools needed to prevent this sort of meltdown. It can simply take the steps that the ECB has failed to do. First, and most importantly, it has to guarantee the sovereign debt of eurozone countries. The Fed simply has to commit to keep the interest rate yields on debt from rising above levels where it risks creating a self-perpetuating spiral of higher debt leading to higher interest rates, which in turn raises the deficit and debt.
This doesn’t mean giving the eurozone countries a blank check. The Fed can adjust the interest rate at which it guarantees debt, depending on the extent to which countries reform their fiscal systems. For example, if Greece and Italy crack down on tax evasion, this can be a basis for allowing a lower interest rate. If they allow their wealthy to freely evade taxes, then this can be a basis for raising rates. The difference between a 2.0 per cent interest rate and 7.0 per cent interest would be a powerful incentive to eliminate corruption and waste.
The idea that a foreign central bank would intervene to affect a country’s monetary policy should not be alien to people in the United States. The Chinese central bank did the same sort of intervention in the United States back in the years 2004-2006…
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