The U.S. Federal Reserve is opening a “temporary lending facility” that will allow foreign banks to convert their U.S. treasury securities into dollars.
The new service complements other Fed programs that lend dollars to 14 other central banks to ensure that other economies don’t run out of greenbacks.
The strong dollar has been a sanctuary of global choice during the current financial crisis, with companies and governments bidding up the price of dollars and often hoarding the ones they get.
The new program reaches beyond the help the Fed extended during the Great Recession or 2012’s eurozone currency crisis.
It also is making dollars available to central banks in a broader range of emerging countries. These countries are falling into arrears, and some approaching default, as payments on their dollar-denominated loans come due at a time when dollars are scarce, especially for developing nations.
TRENDPOST: The Fed’s latest expansion of its global reach emphasizes its emerging role as central bank to the world. Again, the U.S. dollar remains strong against other currencies, despite the national debt above $23 trillion and building because of the deeper financial desperation of most nations.
