Recently, the U.S. announced it would be extending dollar swap lines to the UAE and other Gulf nations. In plain English, Washington just told the world that the petro-states are supposedly short of dollars. That is an obvious lie.
So let’s start with what swap lines actually are.
Dollar swap lines allow foreign central banks to exchange their own currency for U.S. dollars. They are normally used in moments of serious financial stress, when a shortage of dollars could trigger systemic risk and contagion across the global financial system.
The Federal Reserve can create and swap dollars without limit.
The U.S. Treasury can also provide support through the Exchange Stabilization Fund, but that facility is tiny by comparison—around $20 billion. It has been used before to support allies during short-term currency crises, including Argentina’s recent peso crisis under Javier Milei.
So when Scott Bessent suggests the UAE and Saudi Arabia need Treasury-backed swap lines, what he is really saying is that these Gulf powers need tiny $20 billion emergency bailouts.
That is absurd.
The UAE alone has over $2 trillion in sovereign wealth assets and hundreds of billions of dollars worth or Treasuries. Its central bank holds more real foreign reserves than the entire U.S. Treasury Exchange Stabilization Fund—the very fund supposedly coming to the rescue! They have plenty of dollars. Similarly, there is a mechanism already available which enables foreign nations to trade Treasuries for dollars that they could and would be using, if they needed immediate dollar liquidity.
They’ve even come out and said it: after the U.S. ‘leaked’ the UAE needed dollar swaps, the nation immediately publicly denied it. Their own ambassador to Washington had to clarify that suggesting the UAE needs help is a complete misreading of the facts. And yet Bessent continued the lie, claiming Saudi Arabia, other Gulf states, and parts of Asia are also looking for dollar swaps.
Even with the disruptions in the Strait of Hormuz, there is zero possibility Saudi Arabia need dollars. After 50 years of the Petrodollar, they’re stuffed to the gills in dollar denominated assets! So the question is simple: Who or what are these swap lines really for? Because they are clearly not for the UAE or Saudi Arabia.
Disclaimer: Nothing discussed in Mike’s broadcasts should be considered financial, tax, legal or health advice.
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