swap lines


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Central bank liquidity swaps (13) 115,299 – 6,291

Fed advances to CB’s continues to fall

indicating foreign banks are increasingly able to borrow dollars in the market place.

If the remaining dollar loans to the ECB do become problematic,

it opens the door for the ECB to sell euro vs the dollar to pay down its loans.

It would do this if it wanted the euro weaker, perhaps to assist its exporters.

It would not be building dollar reserves, only paying down loans, so

there would be no ideological issue.


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Fed swap lines up $15.7 billion


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Fed USD swap lines outstanding increased $15.7 billion to $329.6 billion last week.

Not good! It’s only one week’s data, but the Fed doesn’t want to see this moving up.

They recently extended the lines from April to October, and likely realize there is no way
they can let the outstanding loans mature and demand payment without market disruptions that would make the rest of the financial crisis look like child’s play.

And if the rest of the world catches on to the notion that the Fed can’t call these loans without serious market disruptions, market forces will cause the lines to expand continuously and only stop when the Fed finally does call a halt either on their own or via Congressional order.


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