Why not condition the Fed central bank swaps on tariffs, US exports or worthy geopolitical goals — as Stephen Miran, who’s confirmation hearing before the Senate Banking Committee is today, has argued?
The record of attaching conditions to central bank loans in a crisis is not good.
A salient case was the Austrian crisis of 1931. The French authorities, holding lots of golden chips, made their help for the Austrian central bank contingent on no customs union between Austria and Germany. The contingency was refused.
Crisis unchecked spread to Germany, toppling a Jewish-run bank (Danatbank) and leading to a moratorium on German international debts. The pound sterling abandoned its gold peg in September 1931.
— Menzie ChinnReplicated under Fair Use from Bordo-McCauley: “A wrong Fed could do the dollar in: An open letter to the US Senate” by Menzie Chinn.