the Fed's permanent currency swap lines

 Here is the English translation of the explanation regarding the Fed's permanent currency swap lines:

The "permanent currency swap lines" established between the U.S. Federal Reserve (FRB) and major foreign central banks play a crucial role in stabilizing the global economy and international financial markets.

Here is a specific breakdown of how this mechanism works and the roles it fulfills.

1. The 5 Central Banks (6 Jurisdictions) Involved

To respond swiftly to global financial crises or emergencies, the Fed maintains permanent, open-ended currency swap arrangements with the following major central banks:

• Bank of Japan (BOJ)
  
  
• European Central Bank (ECB)
  
  
• Bank of England (BOE)
  
  
• Bank of Canada (BOC)
  
  
• Swiss National Bank (SNB)
  
  

2. How the Mechanism Works

A currency swap is literally an agreement to "exchange domestic currencies for another country's currency at a predetermined rate to supply liquidity."

• Immediate Availability: Because these arrangements are permanent, there is no need to negotiate a new agreement each time a global shock occurs (such as the Global Financial Crisis, the COVID-19 pandemic, or sudden geopolitical risks).
  
  
• Supplying U.S. Dollars: When a global shortage of the U.S. dollar—the world's reserve currency—occurs, central banks can pledge their local currency as collateral to borrow U.S. dollars from the Fed and immediately supply them to commercial banks within their own countries.
  
  

3. Key Roles and Functions

The permanent swap lines serve three primary functions:

① Preventing Global "Dollar Shortages" (Liquidity Crunches)

Trade settlements and corporate financing worldwide rely heavily on U.S. dollars. However, when financial markets panic, investors and financial institutions rush to hoard dollars, causing dollars to disappear from the market (credit crunch).

The permanent swap lines act as the ultimate safety net to prevent this evaporation of dollar liquidity.

② Cutting off Systemic Risk (Preventing Financial Panics)

For example, if financial institutions in Europe or Japan faced a default crisis because they couldn't secure enough dollars, that shock could spread globally and trigger a domino effect of bankruptcies reminiscent of the Great Depression.

The ability of central banks to immediately supply dollars to each other nips potential panics in the bud.

③ Providing Psychological Market Stability (A Deterrent Effect)

The mere fact that "infinite-like dollar support is available from the Fed if an emergency arises" gives market participants powerful peace of mind. It acts as a strong psychological anchor that suppresses panic selling and excessive hoarding of U.S. dollars.