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The world has seen the emergence of a rather different system of international lender of last resort, organized as a network of central bank liquidity swap lines largely limited to the core countries of the Global North. In this system, central banks swap their own currency for dollars, which they then on-lend to their own banking systems as needed. During the Global Financial Crisis of 2008-2009, the US Federal Reserve lent almost $600 billion in this way, and in the March 2020 coronavirus “dash for cash,” it lent almost $500 billion. More recently, the Fed’s new standing FIMA repo facility, established in July 2021, allows additional foreign and international monetary authorities to swap their holdings of US Treasury securities for dollar reserves. Unlike the IMF, the Fed is, in fact, a bank able to create money by expanding its balance sheet on both sides, and unlike the IMF’s SDRs, the Fed’s dollar liabilities are immediately spendable to meet external financing crises.
Perry Mehrling is the leading proponent of the so-called money view, a perspective highlighting the crucial role of money within fiat currency regimes where money is anything but neutral. Modern market-based lending by shadow banks is a particular field of relevance to the money view, as Mehrling demonstrates in this paper, because it necessitates a lender of last resort on an international level, too. With the US dollar being the dominating currency of international, cross-border financial activity, this role can only be fulfilled by the Federal Reserve, whether politically preferred or not. Swap lines, i.e. the means by which international central banks in times of crisis swap assets for access to US dollars to lend these on within their own, respective banking systems are the Fed's instrument to step up to its unvoluntary function as the world's central bank.