Around the world, economic catastrophe has shaken up governments and made economists resort to flipping through the pages of the playbook of the 2008 global financial crisis. To keep sinking economies afloat amid the coronavirus pandemic, governments are pumping liquidity into the banking system to prevent the stock market from crashing. It is not certain whether these measures will decrease panic, but the shock has made corporate giants grapple with the problem globally, and requires a quick response.

The world witnessing an acute shortage of dollars for the second time in this century is a threat to global financial activity, which we all know depends on the use of dollars. To contain the fallout from the crisis, America’s central bank with the world’s biggest dollars reserves must step forward to lend money, not just to its financial institutions, but to become the backbone of the entire world.

With uncertainties hovering over, the Federal Reserve has stepped forward to funnel trillions of dollars to central banks around the world. For many, questions remain. How long will the Fed continue to feed other economies? Because in 2008, dollar shortage was only limited to banks of Europe and America, and the present crisis requires the Fed to leave its comfort cushion, since it has to supply dollar liquidity to a polycentric world economy, amid coronavirus crisis.

To pump dollars into the global financial systems “liquidity swap lines” are used. In 1960, the system was deployed to circulate funds between the central banks wresting with upholding the exchange rates of the Bretton Woods system. The central banks credited each other with matching amounts of currency, as Deutschmark credit for the Fed at a German bank, was offset by a dollar credit for the Germans in the United States. To bridge the economic gap, Fed has widened the swap network to include all the 14 banks it supported in the 2008 financial crisis. The news brought back the skyrocketed exchange rate of the dollar in Brazil and South Korea,

The swap lines reflect the influence America’s central bank exerts on controlling economies trading in the dollar-based financial system, additionally also serving as a tool of geopolitics. To many, this system of trading network provides financial stability and security to countries allies with American banks. However, no swap lines were ever extended for Russia and China, which was the reason that they never fall prey to American politics.

Once a marginal part of the world’s economy is now the emerging economies and key drivers of global growth, which includes China in the main lead and Indonesia, Malaysia, Thailand, and Turkey are also on the forefront. But China was already a main driver of global growth and today, its economy is larger than ever and it holds assets in the US as well. As of now, foreign debt on Chinese business has surged to $1.3 trillion and became less sustainable with the increase in dollar value.

The relations between the US and China have been strained for a long time over trade issues. Recently President Trump characterising coronavirus as “Chinese Virus,” has furthered deteriorated their relations in the era when the U.S Treasury market is shaking badly. With the prevailing conflicts, the Fed should manage good relations with China’s central bank by extending its swap line to China.

To avoid further losses, the White House and Congress should set aside their political motives and adjust their political discourse to join hands with the emerging economies in this crucial time to people. Especially, when the pandemic has wreaked havoc due to the dollar-based financial system.