The Fed has extended significant swap lines to 13 countries and this has been a key measure to minimize problems in the global financial system. These temporary swap lines were in most cases expected to expire on April 30 and have been extended to October 30th. This tell us there still is a technical dollar shortage which can only be solved through the Fed providing fund at low cost to other central banks.
The swap lines can be considered targeted increases in money on a bilateral basis. A swap with South Korea provides dollars which may be excessively expensive given current credit rates which can be used to roll-over borrowing that was done in dollars by private firms which cannot get the dollars necessary.
This is a good targeted means of providing liquidity on an a case by case basis as opposed to buying only US assets and hoping for trickle-down effect to parts of the world.
The swap lines can be considered targeted increases in money on a bilateral basis. A swap with South Korea provides dollars which may be excessively expensive given current credit rates which can be used to roll-over borrowing that was done in dollars by private firms which cannot get the dollars necessary.
This is a good targeted means of providing liquidity on an a case by case basis as opposed to buying only US assets and hoping for trickle-down effect to parts of the world.
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