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38 sats \ 4 replies \ @kr 19 Mar 2023
can anyone elaborate on what this action means and the direct side effects you are anticipating?
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655 sats \ 3 replies \ @2minutebitcoin 20 Mar 2023
The Federal Reserve provides dollar swap lines to major central banks, such as the European Central Bank (ECB). The process works as follows:
- The ECB allows European banks to give them US Treasuries at par value.
- The ECB then provides dollars to these banks.
- With the new dollars, the banks can handle any dollar deposit outflows.
- The ECB obtains the dollars from the Federal Reserve using the swap line.
- Throughout this process, no US Treasuries are actually sold.
- Any negative profit and loss (PnL) resulting from the transactions are borne by the central bank, which can stomach infinite losses.
- The dollar swap line balances increase, which will be reflected on the Federal Reserve's balance sheet.
This arrangement ensures that the financial system remains stable, and the banks can manage their dollar deposits without resorting to selling off US Treasuries.
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25 sats \ 0 replies \ @legxxi 20 Mar 2023
The sole fact that they can "stomach infinite losses" tells you how wrong this system is.
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25 sats \ 1 reply \ @kr 20 Mar 2023
appreciate the thorough explanation… how might this system break?
at what point can the central bank no longer “stomach infinite losses”?
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255 sats \ 0 replies \ @2minutebitcoin 20 Mar 2023
The currency breaks. The more they do so, the more they undermine trust in the currency.
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10 sats \ 0 replies \ @ExponentialBTC OP 19 Mar 2023
ZeroHedge has an article with more on this:
Fed Panics, Announces "Coordinated" Daily US Dollar Swap Lines To Ease Crisis
#154217
https://www.zerohedge.com/markets/fed-panics-announces-coordinated-daily-us-dollar-swap-lines-ease-banking-crisis
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0 sats \ 0 replies \ @jcrw 20 Mar 2023 freebie
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