PPVRA
Topic Author
Posts: 7880
Joined: Fri Nov 12, 2004 7:48 am

U.S. Federal Reserve = World Central Bank?

Sun Feb 08, 2009 2:23 am



Quote:
Fed offers unlimited support
Fed to offer dollars to Bank of England, European Central Bank and Swiss National Bank to lend to private banks.

By David Goldman, CNNMoney.com staff writer
Last Updated: October 13, 2008: 9:09 AM ET

NEW YORK (CNNMoney.com) -- The Federal Reserve announced Monday it will offer an unlimited amount of dollars to three other central banks in an unprecedented move to provide liquidity to the global banking system.

The U.S. central bank will lend dollars at a fixed interest rate to the central banks of England, Switzerland and the European Union, according to a joint statement from the banks.

The other central banks will be able to borrow "any amount they wish" in exchange for collateral. The goal is to flood the financial system with much-needed dollars.

http://money.cnn.com/2008/10/13/news...s/index.htm?postversion=2008101309

Acting more or less like a de facto one.

One good news, though, is that its balance sheet has actually shrunk a bit lately. This takes a bit of pressure off the dollar.
"If goods do not cross borders, soldiers will" - Frederic Bastiat
 
Klaus
Posts: 20687
Joined: Wed Jul 11, 2001 7:41 am

RE: U.S. Federal Reserve = World Central Bank?

Sun Feb 08, 2009 3:41 am

Whether that's an attractive offer remains to be seen.

In any case it looks like a Dollar inflation signal, since these Dollars probably won't be (can't be) drawn from the existing supply.

And since the collateral would basically have to be shifted into the Dollar space, it would amount to an emergency aid measure for the Fed at the expense of the other central banks, but also at the expense of the Dollar's value as soon as the lending agreements would end.

The question is if it's a wise move to just keep shoving money down the banks' throats until some of it will (maybe) come out of the other end...

The losses will have to be carried by somebody eventually. Socializing them through inflation would not necessarily be my favourite approach.
 
PPVRA
Topic Author
Posts: 7880
Joined: Fri Nov 12, 2004 7:48 am

RE: U.S. Federal Reserve = World Central Bank?

Wed Feb 11, 2009 6:53 pm



Quoting Klaus (Reply 1):
The losses will have to be carried by somebody eventually. Socializing them through inflation would not necessarily be my favourite approach.

Yeah, same here. High inflation would create even more problems, especially for anyone living with a fixed income like retired folks.

Quoting Klaus (Reply 1):
The question is if it's a wise move to just keep shoving money down the banks' throats until some of it will (maybe) come out of the other end...

Considering the amount of money already poured into them, and little to nothing coming out, maybe the diagnosis is creditworthiness and not simply just a "credit dry up". Until we are done cleaning up our balance sheets of so much bad debt I don't think this will be over, come stimulus or not.
"If goods do not cross borders, soldiers will" - Frederic Bastiat
 
Klaus
Posts: 20687
Joined: Wed Jul 11, 2001 7:41 am

RE: U.S. Federal Reserve = World Central Bank?

Wed Feb 11, 2009 7:11 pm

The question is if the actual status of all the outstanding investments and "investments" is really already settled at this point... I wouldn't be surprised if it took a few quarters to really get a realistic picture of the situation after a few reporting cycles.

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