• 4 minutes Nord Stream 2 Halt Possible Over Navalny Poisoning
  • 8 minutes America Could Go Fully Electric Right Now
  • 11 minutes JP Morgan says investors should prepare for rising odds of Trump win
  • 19 hours Permian in for Prosperous and Bright Future
  • 3 hours Daniel Yergin Book is a Reality Check on Energy
  • 4 hours Gepthermal fracking: how to confuse a greenie
  • 10 hours YPF to redeploy rigs in Vaca Muerta on export potential
  • 1 min US after 4 more years of Trump?
  • 11 hours Top HHS official takes leave of absence after Facebook rant about CDC conspiracies
  • 3 hours The Perfect Solution To Remove Conflict Problems In The South China East Asia Sea
  • 2 days US Oil Refinery Fexibility
  • 2 days China Must Prepare for War Says State Media
  • 2 days Interconnection queues across the US are loaded with gigawatts of solar, wind and storage
  • 19 hours Surviving without coal is a challenge!!
  • 2 days Portuguese government confirms world record solar price of $0.01316/kWh
  • 2 days Trump's Drilling Ban Bombshell Rocks Oil Industry
Global Economy Throwing Up Red Flags For Oil

Global Economy Throwing Up Red Flags For Oil

Investors are feeling increasingly gloomy…

Trade War Weighs On Western Automakers In China

Trade War Weighs On Western Automakers In China

Western automakers in China are…

How COVID-19 Is Transforming The Auto Industry

How COVID-19 Is Transforming The Auto Industry

Dealerships are looking to pre-owned…

Dave Forest

Dave Forest

Dave is Managing Geologist of the Pierce Points Daily E-Letter.

More Info

Premium Content

Return of the Dollar Cavalry

The world is in distress. The economic future looks bleak. Who can the citizens of our great planet turn to, to save them in this time of need?

The Federal Reserve, apparently.

In emergency meetings yesterday, the European Union and the Bank of Japan did just that. Both groups moved to re-open dollar swap lines with the Fed.

The dollar swaps were first implemented in the wake of the Lehman collapse in fall 2008. Governments found that many buyers who do business globally in dollars were having trouble getting access to the bucks they needed.

The strain in the dollar-denominated market was threatening to touch off a fresh round of credit problems.

So the Fed leant Europe, Canada and Japan all the dollars they needed. At the peak, more than $500 billion in swaps were issued. The receiving governments then re-leant these dollars to businesses.

As of a few months ago, these swaps had been unwound. All of the dollars were returned to the Fed, and everything seemed to be good again.

But apparently after last week's market squiggles, dollars are getting hard to find again. Both Japan and Europe are once again "turning on the dollar spigots", taking new loans from the Fed to help supply borrowers.

This is a major about-face on a program that looked like it was headed out to pasture. And also a sign that dollars are still the "go to" currency when times get rough. Lack of dollars in the markets means holders are hoarding and unwilling to sell. When the chips are down, it seems investors would rather hold greenbacks.

We'll see how much ends up being issued under the new swap lines (today's announcement of a $1 trillion bailout for Europe may alleviate some of the liquidity problems). And just how effective the dollar cavalry will be the second time around.

By. Dave Forest of Notela Resources


Download The Free Oilprice App Today

Back to homepage





Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News