Helping The Wrong Areas Again

The Federal Reserve, the Banco Central do Brasil, the Banco de Mexico, the Bank of Korea and the Monetary Authority of Singapore are announcing the establishment of temporary reciprocal currency arrangements (swap lines). These facilities, like those already established with other central banks, are designed to help improve liquidity conditions in global financial markets and to mitigate the spread of difficulties in obtaining U.S. dollar funding in fundamentally sound and well managed economies.

In response to the heightened stress associated with the global financial turmoil, which has broadened to emerging market economies, the Federal Reserve has authorized the establishment of temporary liquidity swap facilities with the central banks of these four large and systemically important economies.

Let us for a change worry about our own economic and financial systems first. What are we helping these foreign central banks in the hope we will somehow benefit from these actions. While there are interconnections in the global financial systems and intertwines economies, could not these monies and efforts be better used here rather than abroad? Lets hope that eventually someone comes to their senses and corrects the situation.