Adam Tooze in the NYT:
For the second time this century, the world is facing an acute shortage of dollar funding. This is a big problem: An enormous amount of global financial activity depends on the use of the dollar. If we are to contain the fallout from the crisis, America’s central bank must act as a lender of last resort not just to America’s financial system but also to the entire world’s.
The good news is that the Federal Reserve is taking its responsibility seriously: It is funneling dollars to central banks around the world. But is the Fed fighting the last war?
The question turns on what we mean by global finance. In 2008 the dollar shortage was confined largely to the banks of Europe and America. That is the Fed’s historic comfort zone, the cradle within which it was born a century ago. The coronavirus crisis explodes that 20th-century framework and poses the question: How does America’s central bank supply dollar liquidity to a polycentric world economy?