America's central bank and five others are working to ensure dollars remain available amid banking blow-ups in the US and Europe.
The Federal Reserve however made no direct reference to the recent banking crisis in its statement. Instead, it explained that they implemented the swap line agreement to strengthen the supply of credit to households and businesses:
“The network of swap lines among these central banks is a set of available standing facilities and serve as an important liquidity backstop to ease strains in global funding markets, thereby helping to mitigate the effects of such strains on the supply of credit to households and businesses.” The latest announcement from the Fed has sparked a debate about whether the arrangement constitutes quantitative easing.
U.S. economist Danielle DiMartino Booth argued however that the arrangements are unrelated to quantitative easing or inflation and that it does not"loosen" financial conditions:One more example: You're a doctor. A patient is having cardiac arrest. You can SEE the paddles to revive him/her but you can't REACH the paddles. These swap lines HAND you the paddles.
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