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  • Fed takes on role of world’s central bank by pumping out dollars

    Fed takes on role of world’s central bank by pumping out dollars

    The Federal Reserve is acting as central banker to the world by seeking to provide the global financial system with the dollar liquidity it needs to avoid seizing up.

    H/T: Bloomberg

    “A lot of borrowing and commerce and investing is done in dollars,” Julia Coronado, founding partner of MacroPolicy Perspectives in New York and a former Fed economist, said in an interview on Bloomberg Radio. “When you have a dollar crunch, it can turn a recession or contraction in activity into a financial crisis very quickly because the dollar shortage can trigger defaults and deleveraging.”

    From the Fed statement:

    The FIMA Repo Facility will allow FIMA account holders, which consist of central banks and other international monetary authorities with accounts at the Federal Reserve Bank of New York, to enter into repurchase agreements with the Federal Reserve. In these transactions, FIMA account holders temporarily exchange their U.S. Treasury securities held with the Federal Reserve for U.S. dollars, which can then be made available to institutions in their jurisdictions.

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