ECB Scrambles For Dollars

Bllomberg reports that the ECB is providing dollars to European banks.

Interesting.

German two-year notes slid for a fourth day as the European Central Bank said it will lend dollars to euro-region banks to ensure they have enough of the U.S. currency, damping demand for safer assets.

The ECB said it will conduct three U.S. dollar liquidity-providing operations in coordination with the Federal Reserve, the Bank of England, the Bank of Japan and the Swiss National Bank. European stocks and the euro rallied. It will offer the loans on Oct. 12, Nov. 9 and Dec. 7.

Interesting . . .

The Federal Reserve
The Bank of England
The Bank of Japan
The Swiss National Bank

If the ECB wants dollars, why do they need to coordinate "liquidity-providing operations" with four central banks?

Why can't they just call up Ben and get a helicopter drop?

Four separate central banks?

They must really need those dollars.

Could there be a shortage of some sort?

Even at the Fed?

Even at the Treasury?

Even at your own bank?

Maybe that's why they need the combined resources of four central banks.

What if, because of fractional-reserve banking, there are 10X as many dollar credits as there are actual dollars backing up them up?

With multiples of dollar credits in the global banking system and precious few actual dollars available, might the value of the remaining dollars soar when they're suddenly needed?

Could that be what happened in 2008?

What if there really is a shortage of dollars?

Do you really think you'll hear a peep about it from Bloomberg, or CNBC, or Marketwatch, or FT, or Handelsblatt?

Or from any banker that worships at the altar of leverage?

Would it really matter, then, if German two-year notes slid for a fourth day?

. . .

ADDENDUM: note that these are loans by the central banks. Loans that will need to be paid back. The ECB will offset the loans with an equivalent amount of euros in the central banks.

This is not a stimulus. This merely keeps the money markets functioning and prevents a large scale bank run. It simply and literally papers over the problem and provides a short-term fix.

These central banks must act as lenders of last resort because the true arbiter of risk -- the marketplace -- has deemed certain European banks to be too risky to lend to.