The US Fed Plays "Let's Make A (Swap) Deal": Over the week of September 15-19, the US Fed was again caught on the hop because of its tiny holdings of foreign exchange reserves. Once again, it had to trot out the threadbare excuse that it was only engaged in "currency swaps" with other central banks to gain the actual foreign currencies which it holds in quantities woefully insufficient to defend the value of the US Dollar.
The "New" Swap Agreement: The new global swap agreement unveiled on September 18 comes as part of a Fed package that almost quadrupled - to $US 247 Billion - the amount of US Dollars sent to other central banks in a coordinated global bid to ease the worst global financial market crisis since the 1920s. The ECB will get a $US 55 Billion increase in US Dollars. The Swiss National Bank will get $US 15 Billion on top of an earlier $US 12 Billion program. The Bank of Japan, Bank of England and Bank of Canada set up new swap programs with the Fed in which Japan gets $US 60 Billion, England $US 50 Billion and Canada $US 10 Billion.
There can be little doubt that these nations already have all the US Dollars that they want.
Once these "swaps" are done, the New York Fed will stand with these currencies in hand. When foreigners, and increasingly Americans, want to escape from the US monetary and credit debacle and sell their US Dollars on the currency market in the US, the New York Fed then stands ready with the foreign currencies in hand to buy the US Dollars being sold with the "swapped" currencies it now holds.
