- Federal Reserve Now Central Bank to the World
by James Gorrie, https://www.theepochtimes.com/
Fed supplies cash to a global economy dependent upon dollar liquidity
As the CCP virus pandemic brings business activity to a halt across much of the world, foreign central banks are facing cash shortages. With so much of the global economy priced in U.S dollars, the Federal Reserve is trying to relieve the massive liquidity crunch that’s occurring around the world. The Fed’s response has been to allow foreign central banks to swap their U.S. Treasury bond holdings in exchange for dollars.
Even though it’s described as a temporary arrangement, it’s still a bigger deal than many realize. In fact, it’s never been done before, not even during the 2008 Global Financial Crisis. In effect, the Federal Reserve is acting like the central banker to much of the world, flooding the world with trillions of dollars to keep up with the liquidity demand.
This new action by the Federal Reserve is particularly helpful to emerging economies, which have taken advantage of low-interest U.S. debt over the past few years. With global business activity plunging in the first quarter of 2020, these smaller economies aren’t the only countries seeing their export volumes crash as the CCP virus pandemic spreads worldwide. But it does make them more vulnerable, since they’re still on the hook for servicing their dollar-denominated debt.