If the assets that are swapped were in fact worth what the swap line values them at, there would be no need for a swap line since the assets could be lent out in the open market. While you’re technically correct that it’s not QE, since the fed reserve is not directly purchasing assets, it has a similar effect on international markets. Foreign central banks purchase or lend USD to their local banks for assets which can’t be used as good collateral (meaning counterparties don’t believe the market has enough liquidity and/or the assets are valued under par) then these central banks, if they run low on USD, swap their own currency for USD through the swap lines.

The net result is USD flows out of the Federal Reserve and into foreign bank reserves, while illiquid and/or under par assets flow into foreign central banks while foreign currency flows into the federal reserve.

So it’s not really correct to say it isn’t like QE at all since in both types of stimulus new USD is issued by the federal reserve in exchange for assets. The difference is in the terms, counterparties, and types of assets.

Great clarification, thanks!

>So it’s not really correct to say it isn’t like QE at all since in both types of stimulus new USD is issued by the federal reserve in exchange for assets.

Uhhh, OK, by that definition the Fed discount window is "a bit like QE" too.

>The difference is in the terms, counterparties, and types of assets.

This is ... not a subtle difference? QE is outright purchase, vs a relative short-term swap structure; domestic commercial banks, vs. foreign central banks; bonds and MBS vs. currency.

They might call it something else but the effect is the same as QE. The FED’s balance sheet has expanded by $300 billion in the past few days [0]

[0] https://mobile.twitter.com/charliebilello/status/16364798793...

That's not what QE is and it does not have the same effect as QE.

It’s a sudden expansion of the Fed’s balance sheet. What else would you call it?

A loan to provide liquidity. QE is the systematic increasing of bond values. These loans will have no effect on bond value and therefore interest rates because they have high interest rates and need to be paid back quickly. They just give debtors enough time to sell a few assets and wait for the situation to calm down.

See my edited comment above. The effect is to erase the past 4 months of quantitative tightening in a single week. We can agree not to call it QE but the effect is nonetheless inflationary as with all cases when the Fed creates money out of thin air, thereby diluting the purchasing power of all dollar holders.