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Nor does QE create foreign liquidity; the Fed can do many things, but printing foreign currency is not one of them.
The crisis on Wall Street, infecting most economies around the world, is affecting Russia (and its billionaires) too especially its banks, which have begun to rely heavily on access to foreign liquidity.
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"There may also be a need to activate swap facilities with other major central banks in the event of a shortfall of foreign exchange liquidity".
But an IMF program may, in fact, boost confidence and provide the foreign currency liquidity necessary to stem speculative pressures.
This attempt to lock in dollars would actually have locked out future flows, since foreign investors prize liquidity.
The measure, critics say, is likely to increase borrowing costs for foreign governments, reduce liquidity and make the market for foreign government bonds more volatile, the opponents charge.
Because their portfolios rely less heavily on loans to domestic companies, and because they have ready access to foreign sources of liquidity, they are better able to weather rough conditions in the local economy.Ricardo Hausmann, chief economist at the Inter-American Development Bank, takes the argument in favour of foreign banks a step further.
To be sure, he says, companies need to be careful of liquidity, foreign-exchange exposure and effects on suppliers.
Rather, the American capital market was acting like a global financial intermediary, providing essential liquidity to foreign governments and enterprises.
If foreign regulators are planning liquidity rules that are more lenient than the American one, foreign banks could step up their lobbying of the Fed.
Gill is President of GFX Corp., a wholly-owned subsidiary of CME Group that provides liquidity in foreign exchange futures, and serves on the Board of Directors of CME Clearing Europe.
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