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 The Federal Reserve is extending a helping hand to the central banks in four emerging-market countries as it takes its efforts to unfreeze money markets on the road. The Fed is opening four $30 billion liquidity swap facilities with the central banks of Brazil, Mexico, South Korea and Singapore until April 30, giving each country access to dollars at close to the same rates that G-7 countries enjoyed until the credit crunch turned into a credit crisis. European Union countries received unlimited access to dollars on Oct. 13.
The move was matched by an International Monetary Fund decision to nearly double its lending limits for emerging market countries, while also waiving its normal economic spending requirements.
As global credit markets have deteriorated, the global demand for access to dollars has skyrocketed as investors the world over flee to the safety of Treasury Bills. Central banks in Europe and the U.S. have been moving relatively quickly to help emerging-market countries deal with the fallout of the credit crisis in their effort to avert a global recession, but their efforts and the amount of dollars and euros being pumped into the economic system are having profound effects. Brad Setser outlines some of those effects in a post of the Council on Foreign Relations' blog, where he predicts that at the current rate of change the world's financial architecture could be remade before the Nov. 15 meeting of G-20 heads of state. - George White See Federal Reserve press release See IMF press release See blog post on Council on Foreign Relations See Dealscape post on Fed swap facility to Europe See related post from Corporate Dealmaker Categories Deal Video
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