Wednesday, November 30, 2011

Games Central Bankers Play

Not sure quite what to make of the coordinated announcement that major central banks (US, UK, ECB, Canada, Japan, Switzerland) will make available "swaps" at new lower interest rates. In effect, the Fed is allowing other central banks to trade their "play money" for dollars as people become less willing to hold Euros, Pounds, etc or accept payment in them.

Not sure what happens when people stop being willing to hold dollars. Presumably that works the other way around, as long as people are willing to hold one of the currencies.

The downside for the US is the possibility that it might get stuck with a big wad of useless Confederate money.