Actually I see its 14 central banks that have this USD FX swap facility (but the BoE, ECB, and BoJ are essentially uncapped).
My sources:
1. I did some early work in a very early precursor of this with Reuters
2. The Bank of International Settlements (BIS) https://www.bis.org/speeches/sp230324a.pdf
3. The Federal Reserve Banks (Richmond) https://www.richmondfed.org/publications/research/econ_focus...
How it works is:
The BoE needs USD, say $10 billion, so it SIMULTANEOUS conjures out of absolute thin air a single ledger entry:
- GBP ₤ 7,437,400,000 - liability to US FED
- USD $10,000,000,000 - asset to UK BoE
It then:
- lends the $10 billion to whoever needs it in the UK
- later (so not immediately*) lets the Fed know it has a new GBP asset.
It later promises to pay it all back. If it can.
But, be very clear, 14 central banks, can and do conjure up USD out of thin air. They call it something boring ("FX swaps").
The modern fiat monetary system is weird. (And I want to be a bank).
But to my earlier point - this print on demand, let us know later facility is only needed because of the demand for USD.
Actually I see its 14 central banks that have this USD FX swap facility (but the BoE, ECB, and BoJ are essentially uncapped).
My sources:
1. I did some early work in a very early precursor of this with Reuters
2. The Bank of International Settlements (BIS) https://www.bis.org/speeches/sp230324a.pdf
3. The Federal Reserve Banks (Richmond) https://www.richmondfed.org/publications/research/econ_focus...
How it works is:
The BoE needs USD, say $10 billion, so it SIMULTANEOUS conjures out of absolute thin air a single ledger entry:
- GBP ₤ 7,437,400,000 - liability to US FED
- USD $10,000,000,000 - asset to UK BoE
It then:
- lends the $10 billion to whoever needs it in the UK
- later (so not immediately*) lets the Fed know it has a new GBP asset.
It later promises to pay it all back. If it can.
But, be very clear, 14 central banks, can and do conjure up USD out of thin air. They call it something boring ("FX swaps").
The modern fiat monetary system is weird. (And I want to be a bank).
But to my earlier point - this print on demand, let us know later facility is only needed because of the demand for USD.