Re: Fed goes ballistic


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(email exchange)

>   
>   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.


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