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(email exchange)

Yes, thanks, seems he doesn’t fully grasp what the swaps are about?

Seems none of them do.

With oil going down the US will spend less on imports making USD harder to get overseas, keeping the USD relatively strong and exacerbating the foreign sector USD squeeze.

>   
>   On Wed, Nov 12, 2008 at 10:44 PM, J A wrote:
>   
>   In his speech, Mr. Kohn said some special lending facilities, such as a
>   program for the commercial-paper market, “are clearly emergency
>   operations only” and would be wound down. Some of the Fed’s
>   temporary lending programs such as currency swaps with other central
>   banks and auctions for credit at the Fed’s discount window might
>   become permanent, he said.
>   


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5 Responses

  1. I wonder if Mr Kohn means that any currency “swapped” would not have to be paid back permanently or that the Fed will keep a permanent capability to conduct temporary swaps?

    The $500+B currently swapped is only authorized by the US Fed until 30 April 09. (Self imposed deadline, Fed can just extend it)

    Sec. Paulson may have to brand the US Fed currency manipulators 🙂

    Resp,

  2. If so, a terrible ripoff for American citizens.

    By the way, dollar libor spreads widening again after 23 days of decline. Some of these swaps had 28 day terms. Could there already be a problem in paying back some of these loans? Debtors on the hook, bidding for dollars to close these swap positions?

  3. For Mike,

    I looked at the schedules, at the ECB, the next 28 Day US$ auction is sched. for Nov 18, the last was Oct 21 and went for $102B. So theoretically the Euro banks look like they will have to roll over $102B USD to refinance just the previous amount.

    Per your tip here, Im going to watch the Euro/USD going into this 28 Day auction next week for clues as to price direction. It will also be of interest to see the amount allotted at the 28-day auction this month vs. last month…

    Resp,

  4. Matt,

    Just posted on this site the updated weekly tally of these forex lines. Up another $41 billion in the latest week (ending today, Nov 13) for a total of $615 billion so far. The Fed is not showing any signs of scaling this back and will likely meet any additional need by foreign CB’s and their respective clients.

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