Thursday, 25 June 2009

Bank of England extends its dollar credit lines

Central bankers are playing it safe. They have decided to extend the crisis credit lines. From a press release from the Bank of England:

The temporary reciprocal currency arrangements (swap lines) between the Federal Reserve and other central banks have been extended to 1 February, 2010. This extension applies to the swap facility agreements between the Federal Reserve and the Bank of England.

The Bank of England, the European Central Bank (ECB), and the Swiss National Bank are today announcing their intention to continue conducting US dollar liquidity-providing repo operations at terms of 7 and 84 days during the third quarter of 2009. In light of the generally reduced use of these operations, the central banks listed above intend to discontinue the current 28-day repo operations at the end of July.

We aren't out of the woods yet.


Roy said...

A timely preparation for the next round of the crisis.

Anonymous said...

"reciprocal currency arrangements (swap lines)"

Now it seems to me that this is something that could cause hyper-inflation.

It's what 'did it' for pre-war Germany, and could do the same for us. Germany was obliged to service reparations after the first world war.

Taking on obligations in a currency other than your own seems to me in the current climate to be reckless.

Now if your currency collapses your foreign currency obligations rocket!

Your debt rockets in the foreign currency

fajensen said...

Your debt rockets in the foreign currency

But this is not a problem since you intended to default all along and stick it to the lenders. Like they always do in Latin America.

It may be bad form but what can they do?