If you haven't seen this one yet from the Huffington Post, the article goes into shocking detail on how the U.S. Federal Reserve has been dumping money into foreign central banks:
The most recent balance sheet released by the Fed shows that $314 billion U.S. dollars are currently doled out to foreign central banks under the foreign exchange program. That's down from a December peak of nearly $600 billion, as central banks have repaid some of the loans.
In exchange for U.S. dollars, the Fed has received foreign currency of equivalent value in an exchange known as a swap. To protect the Fed from losses due to currency fluctuation, the deals include a provision that when the moneys are swapped back, the transaction will be done at the same exchange rate as the initial transaction.
The swaps are listed by the Fed on its balance sheet as "central bank liquidity swaps." The only reference to such swaps in Nexis or Google News comes in the trade paper Market News International, which publishes periodic summaries of fluctuations in the Fed balance sheet. The Fed hasn't hid the exchanges and even sports an FAQ about the transactions on its Web site.
Economy in crisis has a video on this story.
So much for decoupling and isolating contagion, systemic risk.
By the way, anyone bother to follow the money on who is in the Federal Reserve? Check out the New York Fed directors. How many times can you count JP Morgan Chase?