Central Banking’s New Club Class

Six of the world's major central banks recently announced that they had made their swap lines permanent, giving one another unlimited access to their respective currencies. But, even if these central banks have the legal authority to establish a policy for the privileged few, it is neither fair nor right that they have used it.

NEW YORK – In the wake of the 2007-2008 financial crisis, the world’s central banks played a critical role in rescuing the global financial system. They stepped in when private markets froze, acting as lenders and dealers of last resort, and provided additional liquidity to grease the wheels of finance.

These central banks offered their services primarily to domestic actors, but they also extended their largess to foreign private entities. Indeed, even foreign states benefited after central banks entered into swap agreements, giving one another unlimited access to their respective currencies. This has created a worrying precedent.

Originally created as a temporary fix in 2007, the swap lines established at that time connecting the US Federal Reserve, the European Central Bank, and the Swiss National Bank have been extended each time a new crisis has unsettled the markets. More recently, however, six central banks announced that they had made their swap lines permanent.

To continue reading, please log in or enter your email address.

To access our archive, please log in or register now and read two articles from our archive every month for free. For unlimited access to our archive, as well as to the unrivaled analysis of PS On Point, subscribe now.

required

By proceeding, you agree to our Terms of Service and Privacy Policy, which describes the personal data we collect and how we use it.

Log in

http://prosyn.org/KhKTySb;

Cookies and Privacy

We use cookies to improve your experience on our website. To find out more, read our updated cookie policy and privacy policy.