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Recession’s Grip Forces U.S. to Flood World With More Dollars

By Rich Miller

Nov. 24 (Bloomberg) — The world needs more dollars. The United States is preparing to provide them.

In an all-out assault on capitalism’s worst crisis since the Great Depression, the U.S. is taking on the role of both lender and borrower of last resort for the global economy.

To help fight the worldwide dollar squeeze, the Fed has set up currency swap lines with more than a dozen other central banks. Some arrangements, including those with Europe, Britain and Japan, are open-ended, allowing the Fed’s counterparts to draw as many dollars as they need. The U.S. has also established individual $30 billion swap lines with Brazil, Mexico, South Korea and Singapore.

In a speech to a banking conference on Nov. 14, Bernanke characterized these efforts as an “internationally coordinated approach” among central banks to fulfill their function as lenders of last resort.

I’d characterize it as a pure Fed ‘give away’ program.


5 Responses

  1. Pingback: Richbefore Blog
  2. Ive looked at the ECB us$ auctions as of today.

    Today they published the latest 7-day auction (Sett.Nov 28) for $84.5B. Nov. 20 they finished the 7-day operation for $72B, that was up from $60B previous week. (+$12B per week)

    ECB current totals:

    3 rolling 84-day auctions outstanding: $100B (70+20+10)
    28-day: $52B (Next one Dec.18)
    7-day: $84.5B (just went off today settles Nov 28)

    So they have increased (again) the short term funding even though they put $70B on the last 84-day auction. Note that the oldest 84-day auction will roll over on Dec.2. There was only $10B put out on that oldest 84-day auction as that was before the Fed went unlimited/full allotment. Will watch for increase there.

    Totals of all outstanding auctions:
    $212B as of Nov 18
    $224B as of Nov 20
    $236.5 as of Nov 28


  3. And, What does the FED do with all the foreign exchange inflows? My assumption: indirect intervention in the FOREX…That is why the Dollar climbed since last july….Some major banks ( primary dealers?) may be doing fabolous earnings with FOREX operations these days ( which can not last for too long!!!)

  4. No, the fed doesn’t intervene in the fx markets. they just hold euro deposits at the ecb, yen deposits at the boj, peso deposits at the bank of mex, etc. as collateral.

    they did this to lend these entities dollars, not to get their currencies for any particular reason.

    post from bernanke’s address on this topic tomorrow first thing

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