The Federal Reserve: Lender of Last Resort for the World

Bloomberg reports today that Fed will provide an unlimited amount of dollars to the major central banks in Europe:

Oct. 13 (Bloomberg) -- The Federal Reserve led an unprecedented push by central banks to flood the financial system with as many dollars as banks want, backing up government efforts to revive confidence and helping to reduce money-market rates.

The European Central Bank, the Bank of England and the Swiss National Bank will offer European banks unlimited dollar funds with maturities of seven, 28 and 84 days at fixed interest rates against ``appropriate collateral,'' the Washington-based Fed said today. Previously, the Fed had capped at $380 billion the currency it would swap with the three central banks.

[...]

The ECB, the BOE and the Swiss National Bank ``can provide U.S. dollar funding in quantities sufficient to meet their demand'' into 2009, the Fed said today. The Bank of Japan may introduce ``similar measures.''

The aim is to keep the financial system flowing with the world's reserve currency. Banks are hoarding cash for fear they will lose the money if it's loaned or held elsewhere, or because they need it for their own funding needs.

``Central banks will continue to work together and are prepared to take whatever measures are necessary to provide sufficient liquidity in short-term funding markets,'' the Fed's statement said.

What began last December as a $24 billion arrangement between the Fed, the ECB and Swiss central bank was boosted over the past year to $620 billion and broadened to additional countries. The Fed didn't announce changes to the $240 billion of swap lines with six other central banks, including those in Japan, Canada, Denmark, Norway, Sweden and Australia

Like I said earlier, the Federal Reserve is a monetary hegemon.