A fistful of dollars

The US Federal Reserve used just to manage monetary policy for the 12 ‘districts’ of the USA.


But now, it is going global.
First, it opened unlimited “swap lines” with other G7 countries through the European Central Bank, the Bank of England and the Bank of Japan, as well as the Swiss National Bank. Then, last week, it did the same for Brazil, Mexico, New Zealand, Singapore and S Korea.

Those countries within the new “swap lines” can borrow from the USA in their own currencies – so the Fed takes the exchange rate risk. This is also something that has never happened before, and highlights just how seriously the Fed regards current problems in the world financial system. As Bloomberg comments, “5 years from now, Fed Chairman Ben Bernanke will be regarded either as brilliant or reckless for so directly reaching around the globe”.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. Paul is also an invited member of the World Economic Forum’s Global Agenda Council. The aim of this blog is to share ideas about the influences that may shape the chemical industry over the next 12 – 18 months. It will try to look behind today’s headlines, to understand what may happen next in important issues such as oil prices, economic growth and the environment. We may also have some fun, investigating a few of the more offbeat events that take place from time to time. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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