With the Federal Reserve providing all these “loans” (swap lines) on a global level, it avoids a tsunami of forced selling of U.S. After all, if a central bank suffers a liquidity crisis, it can just print more money. The reality is that central banks can “suffer” the duration risk for as long as they need to. The Federal Reserve and the central banks listed above are simply removing the duration risk and liquidity crisis, of which they were the primary cause, and will bring those assets onto their balance sheet. Why would central banks around the world give out $1,000 for something that is only worth $800, for example? Simple – to avoid the entire house of cards from collapsing. This is the international equivalent of that. with the recently announced Bank Term Funding Program (BTFP) to support the regional banks across the U.S. That’s exactly what is happening in the U.S. Treasuries – rather than marked to market. And the worst part is… the central banks can provide U.S. Doing so allows financial institutions around the world to stay solvent and liquid amidst rapid outflows of U.S. dollars to financial institutions in exchange for their U.S. dollar swap lines, it enables central banks to give U.S. Treasuries en masse to raise capital in the middle of a crisis.īy opening these daily U.S. financial institutions all start selling U.S. Why does it have to do this? If it doesn’t, there could be a disaster if non-U.S. financial institutions and central banks, so it opens the daily U.S. The Federal Reserve doesn’t want to be seen as printing money and sending it to non-U.S. dollar swap lines are only necessary in the event of a liquidity crisis, which is what the world is currently experiencing. It’s that they are urgently needed now on a daily basis, explicitly because the world’s central banks are in crisis mode right now.ĭaily U.S. It’s not that these operations already exist. After all, swap lines prior to the announcement tend to operate on a weekly basis. Naysayers may suggest that this is no big deal. These actions – for now – are intended to continue “at least through the end of April.” dollar liquidity swap lines on a daily basis with the European Central Bank, the Swiss National Bank, the Bank of Japan, the Bank of England, and the Bank of Canada. What was announced is of extreme importance and tells us just how bad things have become. So brief as to suggest that it was of little significance… as I believe was intended.Īnd yet the opposite was true. ET on Sunday evening, the Board of Governors of the Federal Reserve System published an announcement with remarkable brevity. But arguably something far more significant happened that went almost unnoticed.Īt 5 p.m. Apple’s Next Consumer Product for Healthcare?ĮV battery recycling – not as easy as it soundsĪll eyes were focused this past weekend on the dramatic collapse of Credit Suisse and the Swiss National Bank’s efforts to save it.
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