The Federal Reserve (Fed) has quietly become the world\u2019s de facto central bank. Acting as the global lender of last resort, it has backstopped the global economy through central bank swap lines\u2014bilateral agreements with foreign central banks\u2014that supplied more than half a trillion dollars during the Global Financial Crisis and COVID-19. Five of those agreements now function as standing, uncapped guarantees of dollar liquidity.<\/p>\n\n\n\n
This Article explains how and why the Fed came to occupy this role. Conventional accounts treat swap lines as a functional response to the dollarized global economy, obscuring the contested institutional development of the Fed\u2019s global authority. Drawing on extensive archival evidence, this Article instead demonstrates that the Fed\u2019s authority emerged through a century-long, path-dependent process in which repeated financial crises shifted decision rights away from the political branches and international organizations and toward the central bank. This institutional account decouples the Fed\u2019s institutional rise from the dollar\u2019s structural rise. It shows how the Fed\u2019s comparative institutional advantages\u2014money creation, legal latitude, and transnational central-bank coordination\u2014cumulatively entrenched the central-bank channel.<\/p>\n\n\n\n
In this new light, the Fed\u2019s global role is both a product and a driver of hegemonic succession\u2014from sterling to dollar, and perhaps now toward renminbi. An original dataset shows that while the Fed remains the central node in a system of proliferating liquidity agreements that structure \u201cweaponized interdependence,\u201d rival networks\u2014notably China\u2019s\u2014are emerging as nascent monetary circuits atop the global dollar order.<\/p>\n\n\n\n