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This is hard to believe. Those CBs don’t have unlimited USD.

So, if true, they will be borrowing them from the Fed via an extension of Fed swap lines.

The FOMC has approved lines of $620 billion as last reported.

This is functionally unsecured lending to these CBs.

Repayment can only come from selling their own currencies for the needed USDs.

(or by somehow net exporting to the US or selling assets to the US which are hard to imagine.)

Somehow, this high risk, unsecured, ‘back door’ lending has remained under all radar screens.

And, if true, we will soon see the total USD funding need in the Eurozone.

Fed Says ECB, Others to Offer Unlimited Dollar Funds

by John Fraher and Simone Meier

Oct. 13 (Bloomberg) The U.S. Federal Reserve led an unprecedented push by central banks to flood financial markets with dollars, backing up government efforts to restore confidence in the banking system.

The ECB, the Bank of England and the Swiss central bank will offer unlimited dollar funds in auctions with maturities of seven days, 28 days and 84 days at a fixed interest rate, the Washington-based Fed said today. The Bank of Japan may introduce “similar measures.”


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4 Responses

  1. Warren, the next line in the article says “the previous swap arrangements will be caped”. While it does not specify at what level they are capped, it reads like the future funding is not even vs. Euro….or as they said UNLIMITED.

    This is very scary, are we becoming the “world bank”. or are Paulson and friends hell bent on the weak dollar policy.

  2. Here’s the country breakdown paragraph from the Sept 29,2008 previous Fed Press Release that limited the amounts by country (now void of course):

    “Foreign Exchange Swap Lines
    The Federal Open Market Committee (FOMC) has authorized a $330 billion expansion of its temporary reciprocal currency arrangements (swap lines). This increased capacity will be available to provide funding for U.S. dollar liquidity operations by the other central banks. The FOMC has authorized increases in all of the temporary swap facilities with other central banks. These larger facilities will now support the provision of U.S. dollar liquidity in amounts of up to $30 billion by the Bank of Canada, $80 billion by the Bank of England, $120 billion by the Bank of Japan, $15 billion by Danmarks Nationalbank, $240 billion by the ECB, $15 billion by the Norges Bank, $30 billion by the Reserve Bank of Australia, $30 billion by the Sveriges Riksbank, and $60 billion by the Swiss National Bank. As a result of these actions, the total size of outstanding swap lines is $620 billion.

    All of the temporary reciprocal swap facilities have been authorized through April 30, 2009.

    Dollar funding rates abroad have been elevated relative to dollar funding rates available in the United States, reflecting a structural dollar funding shortfall outside of the United States. The increase in the amount of foreign exchange swap authorization limits will enable many central banks to increase the amount of dollar funding that they can provide in their home markets. This should help to improve the distribution of dollar liquidity around the globe. ”

    Link here:
    http://www.federalreserve.gov/newsevents/press/monetary/20080929a.htm

    Previous SWAP totals for Europe/Scandanavia($B):

    240 ECB
    80 UK
    15 Denmark
    30 Sweden
    60 Swiss
    15 Norway
    Total: $440 Billion

    Looks like not enough so yes $1+ Trillion made theoretically available?

    Resp,

  3. What looks like madness to you Warren is very long term and well thought out strategy to the CIA jackals, quit being such a myopic sheeple. You breathe because they are kind enough to allow you to do so.

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