Posted by WARREN MOSLER on September 29th, 2008
> This morning the Fed announced a massive expansion of its dollar liquidity
> facilities. Three measures were announced: (1) an increase in total TAF
> auctions from $150 billion to $300 billion, all coming in 84-day funds (2)
> forward TAF auctions of an additional $150 billion, with the auctions to be
> conducted in November for funds available for one or two weeks surrounding
> the year-end and
The TAF would be unlimited, unsecured, and the Fed would set the rate in advance if they had a clear understanding of reserve accounting and monetary operations. It’s about price, not quantity.
> (3) an increase in the currency swaps with foreign central banks (ECB, BoE,
> BoC, BoJ, SNB, RBA, and the Scandis) taking the total outstanding from $290
> billion to $620 billion. In addition, these swap lines were extended through
> April 30, 2009; previously they were authorized through January 30, 2009.
This is a different matter, and more serious and disturbing- foreign central banks borrowing $ from the Fed to support the $ needs of their local banking systems.
Should those banking systems go down and this program gets large enough it could take down their currencies like any other external debt.