What is the Eurodollar System? (2020) [pdf](research.rabobank.com)
research.rabobank.com
What is the Eurodollar System? (2020) [pdf]
https://research.rabobank.com/markets/en/documents/279278_2475340_yourollover-dollar.pdf
115 comments
Imo, a useful next step from here is to read up o
nmodern monetary theory's theory/description of central banking.
Imo, we tend to start with a description of fractional banking for historic reasons, gold backed money and later dollar backed currency.
It's enlightening (to me) to discard this for a moment, and start by forgetting about fractional banking. Just start with loans and follow the ledger as loans are created and distributed.
Fractional banking can then be understood as a control mechanism imposed on a system that already exists.
This isn't historical, but it is logical. Loan-based money makes simpler sense when you think of it as a purely in its own terms.
So... Dollar or euro "Money," in a broad sense, is created every time any kind of loan is made. Bank money is when someone is owed money by a bank... like when you have a bank account. Central bank money is when a central bank owes someone money.
^not necessarily an endorsement of mmt's other ideas or goals.
Imo, we tend to start with a description of fractional banking for historic reasons, gold backed money and later dollar backed currency.
It's enlightening (to me) to discard this for a moment, and start by forgetting about fractional banking. Just start with loans and follow the ledger as loans are created and distributed.
Fractional banking can then be understood as a control mechanism imposed on a system that already exists.
This isn't historical, but it is logical. Loan-based money makes simpler sense when you think of it as a purely in its own terms.
So... Dollar or euro "Money," in a broad sense, is created every time any kind of loan is made. Bank money is when someone is owed money by a bank... like when you have a bank account. Central bank money is when a central bank owes someone money.
^not necessarily an endorsement of mmt's other ideas or goals.
I'm sorry I used the word 'fractional'. It's a bit of a red herring here.
The making of loans does not require a reserve of any sort theoretically. It just requires trust in the institution loaning more of these imaginary dollars/points/beanie babies on a spreadsheet or in a database somewhere. It's just a promise. It was traditionally handled through a backing of some fractional reserve and is still guaranteed in a lot of places by a promise of holding so much reserve of the currency. The reserve fraction varies.
I believe retail banks are more bound by risk and regulatory requirements than by their reserve in making loans.
Modern monetary theory is scares the hell out of me. It seems to give way too much power to too few people. I like instead the idea of encouraging banks to loan to certain industries specifically. This has worked for all these 'miracle' economies like Japan/Korea/China.
The making of loans does not require a reserve of any sort theoretically. It just requires trust in the institution loaning more of these imaginary dollars/points/beanie babies on a spreadsheet or in a database somewhere. It's just a promise. It was traditionally handled through a backing of some fractional reserve and is still guaranteed in a lot of places by a promise of holding so much reserve of the currency. The reserve fraction varies.
I believe retail banks are more bound by risk and regulatory requirements than by their reserve in making loans.
Modern monetary theory is scares the hell out of me. It seems to give way too much power to too few people. I like instead the idea of encouraging banks to loan to certain industries specifically. This has worked for all these 'miracle' economies like Japan/Korea/China.
So...
Re:mmt.
Modern monetary theory seems to enjoy spooking people. Not sure that's a good thing.
However... You can and should separate between "how X works" and "what should we do." Mmt has the best description of how fiat money works. A lot of this is at odds with existing institutional structure in both the US & EU.
In any case, there is no contradiction between MMT and being conservative, anti-centralisation or any other value system. It is just a description of how bank money works.
The powers still exist, they're just non-explicit currently. EU members can, in effect, print euros. As we saw in the Greek crisis, the ECB's actual role/power is making euros exchangeable for euros, regardless of country.
This is very different to how these instructions were conceived, because they didn't understand the money system of their own time.
Similarly, the US Fed-treasury complex doesn't represent where power and control actually are. The whole discourse becomes jumbled.
Re:mmt.
Modern monetary theory seems to enjoy spooking people. Not sure that's a good thing.
However... You can and should separate between "how X works" and "what should we do." Mmt has the best description of how fiat money works. A lot of this is at odds with existing institutional structure in both the US & EU.
In any case, there is no contradiction between MMT and being conservative, anti-centralisation or any other value system. It is just a description of how bank money works.
The powers still exist, they're just non-explicit currently. EU members can, in effect, print euros. As we saw in the Greek crisis, the ECB's actual role/power is making euros exchangeable for euros, regardless of country.
This is very different to how these instructions were conceived, because they didn't understand the money system of their own time.
Similarly, the US Fed-treasury complex doesn't represent where power and control actually are. The whole discourse becomes jumbled.
> Mmt has the best description of how fiat money works.
Are you sure about that? As far as I know, MMT is considered an "unorthodox" theory (i.e. crackpot theory) by mainstream economists.
https://en.wikipedia.org/wiki/Heterodox_economics
Are you sure about that? As far as I know, MMT is considered an "unorthodox" theory (i.e. crackpot theory) by mainstream economists.
https://en.wikipedia.org/wiki/Heterodox_economics
It's certainly got some animated detractors.
Notice though, that a lot of "orthodox" economsists tend to accuse mmt of being both crackpot and trivial. The trivial shot implies that it's trivially derrivate of Keynes.
I'm not sure where mmt begins and ends. Currently, a lot of mmt is associated with guaranteed jobs ideas. I don't like that policy idea at all.
That's why I caveat with "mmt's description of fiat money." Their description of central banking is far superior to monetarism and other "orthodox" theories of the past few decades. It's simpler, less abstract, more universal and more parsimonious with major, observable reality in more places.
By comparison, all neokeynesian models if central banking are cludgey minstrosisies.
Notice though, that a lot of "orthodox" economsists tend to accuse mmt of being both crackpot and trivial. The trivial shot implies that it's trivially derrivate of Keynes.
I'm not sure where mmt begins and ends. Currently, a lot of mmt is associated with guaranteed jobs ideas. I don't like that policy idea at all.
That's why I caveat with "mmt's description of fiat money." Their description of central banking is far superior to monetarism and other "orthodox" theories of the past few decades. It's simpler, less abstract, more universal and more parsimonious with major, observable reality in more places.
By comparison, all neokeynesian models if central banking are cludgey minstrosisies.
I suspect that MMT is correct on a theoretical level, but on a pragmatic level, it's unenforceable and ignores certain realities, such as the fact that inflation is not evenly distributed yet tax rates are (across income levels). I also think that it does dangerously absolve policymakers of responsible deficit management under the banner of "deficits don't matter". It encourages a sort of drunken disregard for expenditures, with little attention paid to productivity of capital expenditures.
But it is not a crackpot theory among central bankers.
But it is not a crackpot theory among central bankers.
Mmt's core doesn't have anything to enforce. It's a description, not a prescription.
I agree that it's tangential to a lot of half baked ideas.
So now, with inflation... Mmt explains why it is happening now, but didn't happen (eg) following the 2008 bailouts.
I agree that it's tangential to a lot of half baked ideas.
So now, with inflation... Mmt explains why it is happening now, but didn't happen (eg) following the 2008 bailouts.
> EU members can, in effect, print euros. As we saw in the Greek crisis, ...
What do you mean? Greece half-jokingly threatened printing shitload of actual physical euros to pay back their public debt and the EU prevented them to do so. Greece defaulted. If EU members really could print, why did Greece default?
What do you mean? Greece half-jokingly threatened printing shitload of actual physical euros to pay back their public debt and the EU prevented them to do so. Greece defaulted. If EU members really could print, why did Greece default?
I mean that when Greece says "I will put €x in your bank account", they can. They don't need to get those euros from somewhere else. They can just make them appear in your bank. That's why they can run deficits without running out of money.
This is basically "where euros come from." They're spent into an economy by governments. The ECB keeps track of how much each government spends, less taxes collected. The diff becomes "national debt." Money owed to the ECB.
The ECB decides interest rates, but this is basically just accounting. Greece will never have a persistent surplus, where ECB loans are paid down. Neither will other member states. So, interest "payments" just determine how fast the national debt grows.
The ECB threatened to stop backing the Greek banking system, which basically would have turned euros in Greek banks into a divergent currency.
This is basically "where euros come from." They're spent into an economy by governments. The ECB keeps track of how much each government spends, less taxes collected. The diff becomes "national debt." Money owed to the ECB.
The ECB decides interest rates, but this is basically just accounting. Greece will never have a persistent surplus, where ECB loans are paid down. Neither will other member states. So, interest "payments" just determine how fast the national debt grows.
The ECB threatened to stop backing the Greek banking system, which basically would have turned euros in Greek banks into a divergent currency.
> I mean that when Greece says "I will put €x in your bank account", they can. They don't need to get those euros from somewhere else. They can just make them appear in your bank. That's why they can run deficits without running out of money.
The Greek government cannot create EUR by fiat. Only the ECB has that power. Any EUR that they could place into an individual entity's account would need to come from tax receipts or some kind of loan (Gov Bonds, loan from IMF etc.). Developed economies run deficits by issuing government bonds and selling them to the open market. If for whatever irrational reason there were infinite market appetite for Greek bonds there never would have been a debt crisis - they could have kept on raising money in the market and running a deficit.
> This is basically "where euros come from." They're spent into an economy by governments. The ECB keeps track of how much each government spends, less taxes collected. The diff becomes "national debt." Money owed to the ECB.
National debt for developed countries is mostly money raised by issuing government bonds in the international bond market. The ECB does not loan member states money directly. In extreme cases like the European Debt Crisis[0] they buy sovereign bonds in the open market (effectively a loan). Money is created by the ECB's interactions with the banking system [1], not government spending.
> The ECB decides interest rates, but this is basically just accounting. Greece will never have a persistent surplus, where ECB loans are paid down. Neither will other member states. So, interest "payments" just determine how fast the national debt grows.
The interest rate the Greek government pays on its debt is not determined by the ECB. It determined by the open market when they issue bonds. The interest rates the ECB sets [2] directly affect the banking system and not government borrowing rates.
[0] https://en.wikipedia.org/wiki/European_debt_crisis [1] https://www.ecb.europa.eu/ecb/educational/explainers/tell-me... [2] https://www.ecb.europa.eu/stats/policy_and_exchange_rates/ke...
The Greek government cannot create EUR by fiat. Only the ECB has that power. Any EUR that they could place into an individual entity's account would need to come from tax receipts or some kind of loan (Gov Bonds, loan from IMF etc.). Developed economies run deficits by issuing government bonds and selling them to the open market. If for whatever irrational reason there were infinite market appetite for Greek bonds there never would have been a debt crisis - they could have kept on raising money in the market and running a deficit.
> This is basically "where euros come from." They're spent into an economy by governments. The ECB keeps track of how much each government spends, less taxes collected. The diff becomes "national debt." Money owed to the ECB.
National debt for developed countries is mostly money raised by issuing government bonds in the international bond market. The ECB does not loan member states money directly. In extreme cases like the European Debt Crisis[0] they buy sovereign bonds in the open market (effectively a loan). Money is created by the ECB's interactions with the banking system [1], not government spending.
> The ECB decides interest rates, but this is basically just accounting. Greece will never have a persistent surplus, where ECB loans are paid down. Neither will other member states. So, interest "payments" just determine how fast the national debt grows.
The interest rate the Greek government pays on its debt is not determined by the ECB. It determined by the open market when they issue bonds. The interest rates the ECB sets [2] directly affect the banking system and not government borrowing rates.
[0] https://en.wikipedia.org/wiki/European_debt_crisis [1] https://www.ecb.europa.eu/ecb/educational/explainers/tell-me... [2] https://www.ecb.europa.eu/stats/policy_and_exchange_rates/ke...
" ... Any EUR that they could place into an individual entity's account would need to come from tax receipts or some kind of loan ..."
I think it is, explicitly, only the loan that is the source of the EUR in your example.
I think MMT suggests this very simple relationship:
Money is created by loans and destroyed by taxes.
This is unexpected as most people think tax receipts somehow bolster the "account" of the government but what MMT is telling us is that the account has no significance because the government arbitrarily controls it.
I think it is, explicitly, only the loan that is the source of the EUR in your example.
I think MMT suggests this very simple relationship:
Money is created by loans and destroyed by taxes.
This is unexpected as most people think tax receipts somehow bolster the "account" of the government but what MMT is telling us is that the account has no significance because the government arbitrarily controls it.
I have not come across any solid resources that actually lay out the theory of MMT. Do you have any recommendations?
MMT is a description of how money actually works.
Ultimately we all create money all the time because it is just a promise by of something in the future. .
The difference is that government can force you to obtain a particular promise via the taxing powers we give it at election time.
No trust required.
Banks then leverage that. For a dollar to be called a dollar there has to be a transitive clearance link to the entity that owns it.
Otherwise it is just a liability of the bank in question - like a share or bond
Ultimately we all create money all the time because it is just a promise by of something in the future. .
The difference is that government can force you to obtain a particular promise via the taxing powers we give it at election time.
No trust required.
Banks then leverage that. For a dollar to be called a dollar there has to be a transitive clearance link to the entity that owns it.
Otherwise it is just a liability of the bank in question - like a share or bond
The major fiat currencies use a proof of violence system to establish value. Specifically, engaging in economic activity incurs fiat denominated tax liabilities, even if that activity doesn’t use the fiat. The currency issuing and taxing authority has offered proof that it will use whatever violence is necessary to enforce those tax liabilities. This creates a more or less inelastic demand for fiat and thus gives it value.
> read up on modern monetary theory's theory/description of central banking.
any recommendations?
any recommendations?
The broadest audience book is probably Kelton's The Deficit Myth:
https://www.goodreads.com/book/show/45731395-the-deficit-myt...
If you want a deeper dive in audio form, I really liked the MMT podcast sub-series embedded in Current Affairs' bird seed podcast. However they spend so much time on the basics and the "controversy" that they only focus on the central banking aspect of it; the critics they bring on are so bad at critiquing it that MMT really come out looking good. There are two aspects:
1) here's how money works with a central bank and what it means about, for example, US government "debt"
2) now that we have these concepts of money, and observe how monetary policy has been used to keep a pool of unemployed people, let's instead try to get full employment with a job guarantee to increase economic productivity.
I am compelled by (2) but it's not as essential as understanding (1) IMHO.
MMTers also tend to focus on government (sometimes called vertical) money creation, and pay much less attention to bank creation of money (sometimes called horitzontal), because MMTers are focusing on monetary policy by currency sovereigns. But horizontal money is super important to understanding economic cycles too. A really good book about this, that focuses on the intricacies of the UK banking system to prove its points, is Where Does Money Come From:
https://www.amazon.com/Where-Does-Money-Come-Ryan-Collins/dp...
https://www.goodreads.com/book/show/45731395-the-deficit-myt...
If you want a deeper dive in audio form, I really liked the MMT podcast sub-series embedded in Current Affairs' bird seed podcast. However they spend so much time on the basics and the "controversy" that they only focus on the central banking aspect of it; the critics they bring on are so bad at critiquing it that MMT really come out looking good. There are two aspects:
1) here's how money works with a central bank and what it means about, for example, US government "debt"
2) now that we have these concepts of money, and observe how monetary policy has been used to keep a pool of unemployed people, let's instead try to get full employment with a job guarantee to increase economic productivity.
I am compelled by (2) but it's not as essential as understanding (1) IMHO.
MMTers also tend to focus on government (sometimes called vertical) money creation, and pay much less attention to bank creation of money (sometimes called horitzontal), because MMTers are focusing on monetary policy by currency sovereigns. But horizontal money is super important to understanding economic cycles too. A really good book about this, that focuses on the intricacies of the UK banking system to prove its points, is Where Does Money Come From:
https://www.amazon.com/Where-Does-Money-Come-Ryan-Collins/dp...
"MMTers also tend to focus on government (sometimes called vertical) money creation ..."
I notice that MMT discussion (esp. on [1]) focus very tightly on sovereign currencies for their examples and spend a lot of time describing the impossibility of default, etc., for governments that make loans in their own currency.
This is, of course, correct.
But I continue to wonder: in a world of MMT - a world wherein we fully adopt MMT as our model and pursue it explicitly - what is to happen to the Argentinas and the Ukraines and the Malaysias, etc. ? That is always glossed over ... is it just assumed that they will be as ill-served as always by the world order ?
AFAICT the answer that MMT has for Argentina (for instance) is: You'll be as fucked as you've always been.
[1] https://www.nakedcapitalism.com/
I notice that MMT discussion (esp. on [1]) focus very tightly on sovereign currencies for their examples and spend a lot of time describing the impossibility of default, etc., for governments that make loans in their own currency.
This is, of course, correct.
But I continue to wonder: in a world of MMT - a world wherein we fully adopt MMT as our model and pursue it explicitly - what is to happen to the Argentinas and the Ukraines and the Malaysias, etc. ? That is always glossed over ... is it just assumed that they will be as ill-served as always by the world order ?
AFAICT the answer that MMT has for Argentina (for instance) is: You'll be as fucked as you've always been.
[1] https://www.nakedcapitalism.com/
There are some really great insights for developing countries from MMT, but one could also argue they are good ideas anyway and perhaps not unique to MMT (a fuzzy critique that could be lobbed at most good advice). Fadhel Kaboub is the person I've heard speak on this the most, including with presentations to Ukraine, for example:
https://denison.edu/people/fadhel-kaboub
https://youtu.be/_6_hgLwaFuk
In general the advice is to 1) maintain economic sovereignty as much as possible by avoiding debt denominated in foreign currency (IMF is pretty evil in this regard), 2) focus on maintaining economic activity that builds the basic needs of society, like food production, etc.
At its heart MMT is a really simple concept and pretty undeniable, just pointing out that the emperor has no clothes when it comes to rhetoric and political whining about debt. Inflation is still a big risk when spending capacity overreaches production capacity (or, as recently, production capacity seems to shrink...).
https://denison.edu/people/fadhel-kaboub
https://youtu.be/_6_hgLwaFuk
In general the advice is to 1) maintain economic sovereignty as much as possible by avoiding debt denominated in foreign currency (IMF is pretty evil in this regard), 2) focus on maintaining economic activity that builds the basic needs of society, like food production, etc.
At its heart MMT is a really simple concept and pretty undeniable, just pointing out that the emperor has no clothes when it comes to rhetoric and political whining about debt. Inflation is still a big risk when spending capacity overreaches production capacity (or, as recently, production capacity seems to shrink...).
Here is my poor attempt :
Imagine I pluck a leaf off a tree and hand it to you and promise that I will do an hours farm labouring if you or anyone else comes back and give me that leaf. I now have a debt, and money is invented to tokenise that debt.
However there are only 24 hours in the day so my productive capacity is limited to (at best) 24 leaves per day. (And yes this leads into time issues - that 24 leaves could buy an hour next week - but should there be 24 leaves for every day I am able to work? or just recycle the same 24 ? This leads us into money velocity which impacts the overall productivity calculation at the end)
Now MMT says that as there is only one farm labourer and there is only 24 hours in the day you can only have 24 leaves in the monetary system - but if you have say, 18 leaves in the system it's fine to pluck another six off the trees - that will allow the plucker to purchase another six hours of my labour with no inflationary cost.
Of course I need to sleep, and it's hard to judge how productive I am etc etc. But the idea is an economy is a whole system and a fiat government is able to purchase up to the productive capacity of the system - which seems quite sensible ... if we know what the productive capacity is.
I may of course be wildly wrong and interested in other peoples views
Imagine I pluck a leaf off a tree and hand it to you and promise that I will do an hours farm labouring if you or anyone else comes back and give me that leaf. I now have a debt, and money is invented to tokenise that debt.
However there are only 24 hours in the day so my productive capacity is limited to (at best) 24 leaves per day. (And yes this leads into time issues - that 24 leaves could buy an hour next week - but should there be 24 leaves for every day I am able to work? or just recycle the same 24 ? This leads us into money velocity which impacts the overall productivity calculation at the end)
Now MMT says that as there is only one farm labourer and there is only 24 hours in the day you can only have 24 leaves in the monetary system - but if you have say, 18 leaves in the system it's fine to pluck another six off the trees - that will allow the plucker to purchase another six hours of my labour with no inflationary cost.
Of course I need to sleep, and it's hard to judge how productive I am etc etc. But the idea is an economy is a whole system and a fiat government is able to purchase up to the productive capacity of the system - which seems quite sensible ... if we know what the productive capacity is.
I may of course be wildly wrong and interested in other peoples views
Note that no one can link to an academic description by an economist which is precise enough to be right or wrong.
Oh no, there's plenty of papers like that. There's plenty of people claiming the ideas are "wrong" but typically they seem to misunderstand what they are critiquing. Here's a few papers from Stephanie Kelton (née Bell), for example, including ideas concrete enemigo to have been critiqued and then responded to:
https://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=968...
There are many other academic authors with plenty of critiqueable ideas, but Kelton has been the most prominent as far as I can tell, and also Bourne most of the burden of being critiqued, often completely unfairly and unseriously.
https://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=968...
There are many other academic authors with plenty of critiqueable ideas, but Kelton has been the most prominent as far as I can tell, and also Bourne most of the burden of being critiqued, often completely unfairly and unseriously.
Jason Bourne would concrete these enemigo straight away !
I don't understand this comment.
Your autocomplete really shone today.
Oh, I see! Thanks. Autocomplete is my perpetual enemy. I wish I could go back to the keyboard from the first iPhone version, it was so so so much better.
The absolute worst part of recent macOS is when it inserts completely embarrassing errors into presentation after a word has been completely typed. At least a typo can be deciphered, putting in the wrong word causes sentences that look like the mistake was intentionally included. Hate hate hate it.
The absolute worst part of recent macOS is when it inserts completely embarrassing errors into presentation after a word has been completely typed. At least a typo can be deciphered, putting in the wrong word causes sentences that look like the mistake was intentionally included. Hate hate hate it.
Economics Explained has an excellent video on it
https://www.youtube.com/watch?v=aIQY44LCIjc
https://www.youtube.com/watch?v=aIQY44LCIjc
I would recommend going direct instead.
Mmt is very simple, but needs to be explained with a bank ledger. Metaphors aren't helpful, imo.
Mmt is very simple, but needs to be explained with a bank ledger. Metaphors aren't helpful, imo.
[deleted](1)
I see it differently. Before the Federal Reserve, any bank engaging in fractional reserve banking was committing fraud. Rather than crack down on this fraudulent behavior, the Fed institutionalized it, which seems like an unquestionably negative thing. Thanks to the Cantillion effect, those closest to the source of money are enriched, I would argue unjustly and at the expense of all others using that money. I believe this to be one of the major sources of wealth inequality in the world today.
Fractional reserve banking existed in Europe a century or more before the the United States even existed, let along the Federal Reserve. And was not seen as fraudulent -- in that it was a common (not rare) practice, that people knew was going on and were happy to accept the notes. Central banks came into existence to regulate fractional reserve banking before the United States, let alone the Federal Reserve, existed either. the US Federal Reserve did not invent being a central bank.
Your way of seeing it differently is ahistorical, and strangely US-centric for a historical view of banking or currency.
Your way of seeing it differently is ahistorical, and strangely US-centric for a historical view of banking or currency.
Couldn't it be said that all the wealth inequality created by this system in europe created a massive collection of poor europeans who then decided to sell themselves to indentured sertitude in the America? This situation is the basis for why creating a fundamentally different kind of banking system was so important to the first few generations of Americans, thus the previous comment not being ahistorical at all.
Anything can be said, but I would like to see some citation for "This situation is the basis for why creating a fundamentally different kind of banking system was so important to the first few generations of Americans" -- I have never seen any history suggesting that the American colonists were focused on intentionally creating a novel kind of banking system different from Europes because of thinking Europe's led to inequality; if that's actually a non-imaginary thing colonial leaders were doing I'm interested in reading good history on it.
The internet sometimes seems to think that making up plausible stories is a valid way of understanding what happened historically.
The internet sometimes seems to think that making up plausible stories is a valid way of understanding what happened historically.
I agree with your last statement, good thing I am not the internet! The question of centralised sovereign banking was one of the first great debates of American politics/economics. For sake of not going into to much depth here, I will start and end with the Bank of Amsterdam, which is considered to be the first central bank. It became insolvent in 1790 due in part of its allowance for irriationally large sums of money to be loaned to big buiness such as the East India Company(the parent comment on CB's helping those closest to the "printing" spiggot). This, even as we say to this day, leaves the big players with assets bought with those loans and poor people with nothing and potentially no job until markets revitalize. Some solutions produced in my country's history includes the free banking system of Massachusetts, with the suffolk bank, and Andrew Jacksons attempt at decentralised sovereign banking. I am not here advocating for either btw. Hopefully this gives you a short, and noncomprehensive start on A: a cause for early distrust of central banks creating monetary favoritism to big buisness and B: the Americans who wanted different solutions. I might add, the parents statement about fractional reserve banking having been considered "fraud" is a bit out there, I'm with you on that. Ill try to scrape url sources later, watching the Masters today. Cheers!
The concept of money and how it works is crazy when you delve into it. It’s amazing how effective the system has been at raising billions out of poverty in the last century.
At least, I would not predict the success if I were a random citizen from 100 years ago…
At least, I would not predict the success if I were a random citizen from 100 years ago…
Money has been around for thousands of years, attributing industrialization to it is wrong.
It did play a role, but more like an enabler instead of being the cause
It did play a role, but more like an enabler instead of being the cause
Money changed at lot on the 20th century.
It used to be limited by natural supply. On the beginning of the 20th century it became limited by government policy, and on the end of the 20'th century countries started experimenting with letting it limited only by market forces.
It used to be limited by natural supply. On the beginning of the 20th century it became limited by government policy, and on the end of the 20'th century countries started experimenting with letting it limited only by market forces.
"This is kind of a revelation. It means that the special power that the US has in printing dollars is only special in that it can never default on the dollars because it can, in the end, print them for real."
This is true - but it is true of any sovereign currency. The ECB can't default in euro-denominated loans, etc.
The real special power of the US Dollar is that it is the only thing that is accepted to pay US taxes.
No matter what you have and no matter how valuable it is - gold bars, Monets, diamonds, Malibu beachfront - you cannot use it to pay US taxes: you must sell those assets and buy dollars to pay them.
That's not a minor detail or a quirk - that's the point of the whole system.
This is true - but it is true of any sovereign currency. The ECB can't default in euro-denominated loans, etc.
The real special power of the US Dollar is that it is the only thing that is accepted to pay US taxes.
No matter what you have and no matter how valuable it is - gold bars, Monets, diamonds, Malibu beachfront - you cannot use it to pay US taxes: you must sell those assets and buy dollars to pay them.
That's not a minor detail or a quirk - that's the point of the whole system.
> only thing that is accepted to pay US taxes.
That is also true of all sovereign currencies, for their own taxes. But not all countries get to borrow their own currency from foreign lenders. Hyperinflation in Germany and Zimbabwe happened because they owed money in other countries' currency.
That is also true of all sovereign currencies, for their own taxes. But not all countries get to borrow their own currency from foreign lenders. Hyperinflation in Germany and Zimbabwe happened because they owed money in other countries' currency.
"That is also true of all sovereign currencies, for their own taxes."
Yes, certainly but it bears repeating: that is the entire point.
That lever of control - being the sole provider of a resource that you must demand - is a core feature of the government as we know it.
Yes, certainly but it bears repeating: that is the entire point.
That lever of control - being the sole provider of a resource that you must demand - is a core feature of the government as we know it.
> This is kind of a revelation. It means that the special power that the US has in printing dollars is only special in that…
Note that you Have this special power as well: when you write a check you spend dollars even though your bank balance has not changed. That also happens briefly when the recipient deposits the check. The same happens when you do a credit card transaction.
We don’t really notice these because they are quite transient.
Note that you Have this special power as well: when you write a check you spend dollars even though your bank balance has not changed. That also happens briefly when the recipient deposits the check. The same happens when you do a credit card transaction.
We don’t really notice these because they are quite transient.
"These loans are given by parties that are not able, officially, to print dollars but, at the same time, 'print' by loaning them - or rather the promise to pay, in dollars mostly, some sum that the loaner has fractionally. That is, they don't own as many dollars as they're loaning. It's just entries in a database."
Which is the exact way that Federal reserve creates dollars.
Just that, in this instance, the creator is different. It makes no difference to the US government, though.USD is USD. In fact, this only benefits the US.
Which is the exact way that Federal reserve creates dollars.
Just that, in this instance, the creator is different. It makes no difference to the US government, though.USD is USD. In fact, this only benefits the US.
Doesn't the same apply to domestic banks? Most units of any currency is created by commercial banks, not by the central bank.
Yes. The banks are the ones that ultimately are creating money through giving out loans. The fed, as far as I understand, can only influence this indirectly.
Interest rate setting is supposed to throttle the demand for loans. Lower interest rates, higher loan demand. Therefore, more money enters the economy.
However, the other side of the equation is the banks' appetite for giving loans. There are times when banks (due to regulation or market risk they perceive) that they'll be more or less likely to make loans regardless of the demand side.
The fed seems to be only controlling the demand and not the supply. They cannot force banks to make loans more willingly directly.
Another aspect is the appetite for the sorts of loans banks want to give. There's an argument that too many loans are now given for speculation (housing, asset purchase) and not for things that grow the economic pie like small businesses. Small business are more risky for the banks than speculation so we end up in this sort of undead economy.
Interest rate setting is supposed to throttle the demand for loans. Lower interest rates, higher loan demand. Therefore, more money enters the economy.
However, the other side of the equation is the banks' appetite for giving loans. There are times when banks (due to regulation or market risk they perceive) that they'll be more or less likely to make loans regardless of the demand side.
The fed seems to be only controlling the demand and not the supply. They cannot force banks to make loans more willingly directly.
Another aspect is the appetite for the sorts of loans banks want to give. There's an argument that too many loans are now given for speculation (housing, asset purchase) and not for things that grow the economic pie like small businesses. Small business are more risky for the banks than speculation so we end up in this sort of undead economy.
For a long time, dollars were almost exclusively created by banks.
The only other way is for The Fed to monetize the Federal Government's deficit spending.
This didn't regularly happen until 2008 - but I'm skeptical that the genie will ever be put back in the bottle.
The only other way is for The Fed to monetize the Federal Government's deficit spending.
This didn't regularly happen until 2008 - but I'm skeptical that the genie will ever be put back in the bottle.
The scale is notable.
> The results are as shown below as of end-2018: USD57 trillion, nearly three times the size of the US economy before it was hit by the COVID-19 virus. Even if this measure is not complete, it underlines the scale of the market.
> The results are as shown below as of end-2018: USD57 trillion, nearly three times the size of the US economy before it was hit by the COVID-19 virus. Even if this measure is not complete, it underlines the scale of the market.
Sure but these are regulated and insured by these bank's said central banks. That does not apply for Eurodollars.
Eurodollars are dollars held in non-US banks, which are nonetheless banks and therefore subject to the banking regulations of their respective jurisdictions.
Yea but the central governments can’t insure the deposits because they lack the ability to print dollars.
I don't think it matters. Deposit insurance is independent from the ability to print dollars. It's an insurance fund that gets contributions from banks.
And a 100 billion dollar line of credit from the treasury. The FDIC describes itself as being “ backed by the full faith and credit of the United States government.” If there was a systemic issue, the government would likely need to intervene.
The Fed currently has about $9 Trillion in assets (and corresponding liabilities). $100 billion from the Treasury for the FDIC is a rounding error. In 2008, the Fed doubled their balance sheet practically overnight from $1T to $2T.
The Fed can do that any time they want by buying bank debt with newly created dollars, which effectively socializes the risk in the banking system, so it doesn't fail, hopefully at something resembling market rates. The Fed then runs the risk that they don't get paid back instead of an individual bank, but the modern Fed cannot fail, that sort of thing can only affect the currency as a whole, by weakening it generally speaking.
The Fed can do that any time they want by buying bank debt with newly created dollars, which effectively socializes the risk in the banking system, so it doesn't fail, hopefully at something resembling market rates. The Fed then runs the risk that they don't get paid back instead of an individual bank, but the modern Fed cannot fail, that sort of thing can only affect the currency as a whole, by weakening it generally speaking.
Yes, but the US is not unique in this respect. Other countries also have governments and central banks that would intervene in the event of a systemic crash.
Last I checked the FDIC had about $50B in assets to back $2T in bank deposits. In other words, they could hardly scratch the surface of a systematic problem.
If all banks go bankrupt at once, sure, the insurance will also go bankrupt.
The problem is that the banking system carries a large systematic risk of going bankrupt all at once, and deposit insurance is not adequate to deal with that. The real guarantor of your deposits is the Fed not the FDIC, and fortunately they did a bang up job of it last time around.
Check out Layered Money by Nik Bhatia. He expounds on the different layers of money, Eurodollars being a system of layered money, and how they evolve through time.
> not in their ability to print them
Bond buying & yield curve intervention is pretty special. And catastrophic, IMO.
Bond buying & yield curve intervention is pretty special. And catastrophic, IMO.
Correct, what you stumbled upon is merely the modern version of exorbitant privilege and US dollar international seigniorage and then you have the cantillon effect at the international level, but that's just less of an issue than the dollar seigniorage itself
If it weren't for the source, the cringy Matrix references and sensationalist writing would have made me dismiss this without much thought. The Wikipedia article on Eurodollars and some others make all of this sound a lot more mundane.
So I'm confused. Does anyone know, or have a better source, whether there's actual cause for concern?
So I'm confused. Does anyone know, or have a better source, whether there's actual cause for concern?
Read the comments first as usual, and thought, hmm some references to Matrix can't be that bad. Color me surprised.
It's awfully patronizing for something coming from what I understand to be one of the larger Dutch banks. It reminds me of some of the internally-circulated bank employee training videos that I've had to watch for a past job, but none of them were this bad.
Strongly recommend watching Eurodollar University, Emil and Jeff have some unique takes.
https://youtube.com/c/EmilKalinowski
https://youtube.com/c/EmilKalinowski
This seems like a decent starting video from that: https://youtu.be/Nhyz4DUMht8
Matrix-analogy-free podcast from 2019, https://www.macrovoices.com/podcast-transcripts/548-jeff-sni...
> You contend that there are massive amounts of US dollar money supply being created outside of the banking system and, therefore, outside of oversight and regulation by the Federal Reserve ... it wasn’t until 1964 that anyone in any kind of official capacity finally got around to investigating this thing, even though it was almost a decade old by then. The Bank for International Settlements finally published the first study on the subject of Eurodollars ... people like Milton Friedman and Paul Einzig, very highly respected people in finance that no one questions the credibility of, who are attesting that this was actually going on as long ago as the 1960s.
Cambridge University, March 2022, https://www.cambridge.org/core/journals/enterprise-and-socie...
> This article challenges current interpretations of the rise of the Eurodollar market. It argues that rather than being the exclusive innovation of British banks, the Eurodollar market had also Italian origins ... resulting from the fact that nonresident foreign-currency deposits were not subject to reserve requirements ... The comparison facilitates an approximate estimation of the size of the Eurocurrency market in the late 1950s and, even more importantly, a recalibration of the view that the City of London was the dominant Eurodollar player from the outset.
> You contend that there are massive amounts of US dollar money supply being created outside of the banking system and, therefore, outside of oversight and regulation by the Federal Reserve ... it wasn’t until 1964 that anyone in any kind of official capacity finally got around to investigating this thing, even though it was almost a decade old by then. The Bank for International Settlements finally published the first study on the subject of Eurodollars ... people like Milton Friedman and Paul Einzig, very highly respected people in finance that no one questions the credibility of, who are attesting that this was actually going on as long ago as the 1960s.
Cambridge University, March 2022, https://www.cambridge.org/core/journals/enterprise-and-socie...
> This article challenges current interpretations of the rise of the Eurodollar market. It argues that rather than being the exclusive innovation of British banks, the Eurodollar market had also Italian origins ... resulting from the fact that nonresident foreign-currency deposits were not subject to reserve requirements ... The comparison facilitates an approximate estimation of the size of the Eurocurrency market in the late 1950s and, even more importantly, a recalibration of the view that the City of London was the dominant Eurodollar player from the outset.
[deleted]
Interestingly, there is a Eurodollar future provided by CME. It is currently quoted at 96.765, meaning a deposit rate of 3.235%. Does that mean that the global market for dollars has already priced in Fed rate hikes?
Yes, and this eurodollar futures price (and related options contracts) is used to derive, mathematically, the "percent chance of a rate hike" that you see around the fed meetings.
Yes, in a nutshell.
I admit that this has piqued my curiosity, but my bs-meter is flashing yellow: this document is barely coherent.
I was wondering if it was just me being old thinking this sounded like it was written by a teenager on reddit. I kept looking at the hostname, is this really a legit financial organization hosting it?
I can't disagree more. The first page alone defines what a eurodollar is(n't) in clear terms.
I don’t have a problem with the definition. I’m not sure who or what you’re disagreeing with.
You said
> this document is barely coherent.
Then say
> I don’t have a problem with the definition
To a reasonable person, these two statements are not consistent.
edit: I just get a feeling that you're relying on logical fallacy [0]
[0] https://en.wikipedia.org/wiki/No_true_Scotsman
> this document is barely coherent.
Then say
> I don’t have a problem with the definition
To a reasonable person, these two statements are not consistent.
edit: I just get a feeling that you're relying on logical fallacy [0]
[0] https://en.wikipedia.org/wiki/No_true_Scotsman
Coherence: the quality of being logical and consistent.
Note that "coherence" and "definition" are two different concepts. Definition may be required, but is not sufficient, to achieve coherence.
Also note that the definition of eurodollar is only a small part of the document. I was commenting about the overall document, and never said anything about the definition of eurodollar.
Note that "coherence" and "definition" are two different concepts. Definition may be required, but is not sufficient, to achieve coherence.
Also note that the definition of eurodollar is only a small part of the document. I was commenting about the overall document, and never said anything about the definition of eurodollar.
> I was commenting about the overall document, and never said anything about the definition of eurodollar.
And what, specifically, was not "logical" or "consistent" in the rest of the article?
To my other point, and fundamentally where you're coming from, how is your statement here not guilty of committing an appeal to purity fallacy?[0]
> It definitely doesn't have the decorum I'd expect from a serious expert.
And what, specifically, was not "logical" or "consistent" in the rest of the article?
To my other point, and fundamentally where you're coming from, how is your statement here not guilty of committing an appeal to purity fallacy?[0]
> It definitely doesn't have the decorum I'd expect from a serious expert.
I was waiting for the paragraph "revealing" that it's George Soros or the Rothschilds pulling all the strings... The topic is ripe with (sometimes actively harmful) conspiracy theories already, it's neither funny nor enlightening to inject more of it.
Indeed an interesting topic. The demand for dollars largely stem from the ability to use them. When doing international trade you want to be paid in a currency you know is fairly stable and exchangeable to other goods and services with relative ease.
When sovereigns in developing countries issue bonds they tend to need to do it in USD to get any takers; else the risk of their inflating the value of their currency away is just to great.
As US dominance decreases it's currency will face competition from e.g. the yuan. Ray Dalio writes about this in his "The Changing World Order".
When sovereigns in developing countries issue bonds they tend to need to do it in USD to get any takers; else the risk of their inflating the value of their currency away is just to great.
As US dominance decreases it's currency will face competition from e.g. the yuan. Ray Dalio writes about this in his "The Changing World Order".
“...Gold is gold everywhere, fungible and indifferent. But when a disk of gold is stamped by a coiner with certain pompous words and the picture of a King, it takes on added value -- seigneurage. It has that value only in that people believe that it does -- it is a shared phant'sy.”
- Neal Stephenson, The Confusion
Good discussion in Wired interview: https://www.wired.com/2004/04/clearing-up-the-confusion/
- Neal Stephenson, The Confusion
Good discussion in Wired interview: https://www.wired.com/2004/04/clearing-up-the-confusion/
Even more relevant now in the context of the Russian invasion of Ukraine.
Debt is very useful for financial formalization, it can translate actual existing trust/political relationships into monetary ones. It is feudalism distilled to its pure elements.
Even tether/other usd stablecoins fall under this definition right? They all are stored elsewhere outside of the us, in part.
These are dollar derivatives—a financial instrument that is redeemable by USD at a fixed exchange rate, which is backed (theoretically) by reserves. Eurodollars are just USD deposits held outside the US.
Not only deposits, but also debts ?
No, debts are a different type of asset. Eurodollars are currency, i.e. cash and bank deposits.
So, "USD debt liabilities of non-US non-financial corporations" that make about one quarter of all eurodollars... aren't debt ??
Debt liabilities are debt. Currency is not a debt liability.
A bank deposit is a debt, right?
No, it's a deposit which you can withdraw at any time. Although some people argue that a bank deposit is technically a loan—from a legal perspective they might be characterised as a loan in some jurisdictions, from an economic perspective a deposit is cash and not a loan.
But then how do you get the multiplicative effect described in the article without any debt ??
You get a multiplicative effect because when banks lend they create new deposits (=new money) in the process. That doesn't mean that the deposits created in this way are debt. They are not, the deposits are money. The loan is debt. The loan is an asset in the bank's balance sheet, whereas the deposit is a liability.
They explain it in more detail here: https://www.core-econ.org/the-economy/book/text/10.html#108-...
They explain it in more detail here: https://www.core-econ.org/the-economy/book/text/10.html#108-...
No one really knows? If the counter-part is held, say, in T-bills, then these are as good as dollars. But it could be anything really.
This is not correct - "Consider what the logic of the Eurodollar system implies. Global financial markets and the global economy rely on the common standard of the USD for pricing, accounting, trading, and deal making. Imagine a world with a hundred different currencies – or even a dozen: it would be hugely problematic to manage, and would not allow anywhere near the level of integration we currently enjoy"
1. It is common to use USD because it is convenient, but it is not a standard. There is no structure that forces it.
2. The world does have dozens of liquid currencies already. Banks do offer rates on them. And banks do trade in them without the USD being in play.
3. It is simply not true that the current system of floating exchange rates would fail to function without the USD.
The author moves on to talking about it being a privilege to be a reserve currency. It is not a privilege to be the reserve currency - countries generally go out of their way to avoid it happening - the Swiss central bank headed it off within the last ten years. Patrick Boyle's recent video /The Weaponization Of The Dollar/ touches on this in the last few minutes.
I stopped reading here.
The concept of Eurodollars (US-denominated debt outside the reach of US foreign policy) has been effectively obsolete in the developed world for decades.
Any bank who has a balance sheet large enough to be involved in significant trading operations (e.g. operating as a top-level general clearing member at a clearing house, or acting as a prime broker for foreign exchange transfers) is also able to qualify for an account with the US central bank. This gives them access to cheap lending (free money).
When you take on this membership, you sign up to align with aspects of US foreign policy. And not just for stuff you do that is denominated in USD - it applies to all your business globally.
A recent example of this - Deutsche Bank got fined for money laundering done by Danske's Estonian Branch. Danske were operating on DB's balance sheet, which means that DB had failed to ensure that their balance sheet use aligned with US standards on money laundering, so DB got fined in the US even though they had no direct hand in the wrong-doing.
It is these arrangements that allow the US to be so effective in launching sanctions against other countries. Consider how Trump decided to go after Iran even though European countries wanted to stick by the Obama-era deal, and how thorough those sanctions have been.
Is it possible to have a top-tier western bank who choses not to have a relationship with the US central bank? Hypothetically, yes, but who would do such a thing? Such a bank would lose access to cheap lending in the world's largest economy and would lose economies of scale.
It is not the USD that is powerful, it is the US. The US is a vast economy with a strong rule of law tradition. Common use of USD is a side-effect of that.
1. It is common to use USD because it is convenient, but it is not a standard. There is no structure that forces it.
2. The world does have dozens of liquid currencies already. Banks do offer rates on them. And banks do trade in them without the USD being in play.
3. It is simply not true that the current system of floating exchange rates would fail to function without the USD.
The author moves on to talking about it being a privilege to be a reserve currency. It is not a privilege to be the reserve currency - countries generally go out of their way to avoid it happening - the Swiss central bank headed it off within the last ten years. Patrick Boyle's recent video /The Weaponization Of The Dollar/ touches on this in the last few minutes.
I stopped reading here.
The concept of Eurodollars (US-denominated debt outside the reach of US foreign policy) has been effectively obsolete in the developed world for decades.
Any bank who has a balance sheet large enough to be involved in significant trading operations (e.g. operating as a top-level general clearing member at a clearing house, or acting as a prime broker for foreign exchange transfers) is also able to qualify for an account with the US central bank. This gives them access to cheap lending (free money).
When you take on this membership, you sign up to align with aspects of US foreign policy. And not just for stuff you do that is denominated in USD - it applies to all your business globally.
A recent example of this - Deutsche Bank got fined for money laundering done by Danske's Estonian Branch. Danske were operating on DB's balance sheet, which means that DB had failed to ensure that their balance sheet use aligned with US standards on money laundering, so DB got fined in the US even though they had no direct hand in the wrong-doing.
It is these arrangements that allow the US to be so effective in launching sanctions against other countries. Consider how Trump decided to go after Iran even though European countries wanted to stick by the Obama-era deal, and how thorough those sanctions have been.
Is it possible to have a top-tier western bank who choses not to have a relationship with the US central bank? Hypothetically, yes, but who would do such a thing? Such a bank would lose access to cheap lending in the world's largest economy and would lose economies of scale.
It is not the USD that is powerful, it is the US. The US is a vast economy with a strong rule of law tradition. Common use of USD is a side-effect of that.
It is more complex than being obsolete. The Eurodollar market came into being because of Reg Q, which capped the interest that banks could pay. As interest rates rose through the 1960s, this cap became effective (and banks starting losing deposits) and US banks opened branches in Europe so they could acquire USD deposits at higher rates, often from institutions in the US (the historical account given in the pdf is wrong, it was nothing to do with the Marshall Plan, clearly the author just read Wikipedia, US started lending internationally in the 20s and was a huge creditor to Germany). Also, lending offshore was a way to get around the limits on lending introduced by the Fed (again, this is complex but the policy instrument in the late 60s was free reserves, not interest rates so there were volume limits, although these were circumvented and free reserves was a totally useless in isolation as a policy instrument).
Changes in regulation/monetary policy meant the function of the market has changed significantly since then. So Eurodollars tends to just refer offshore dollars, and this is still a huge market.
The rest of the article is basically accurate in identifying the huge role that the offshore dollar market plays in the economic cycle, particularly of EMs (the article identifies CBs, the demand for USD there since the mid-90s has grown exponentially...it is huge). The Fed opening swap lines en masse in 2008 (really a continuation of what occurred in the mid-90s) was a turning point.
Changes in regulation/monetary policy meant the function of the market has changed significantly since then. So Eurodollars tends to just refer offshore dollars, and this is still a huge market.
The rest of the article is basically accurate in identifying the huge role that the offshore dollar market plays in the economic cycle, particularly of EMs (the article identifies CBs, the demand for USD there since the mid-90s has grown exponentially...it is huge). The Fed opening swap lines en masse in 2008 (really a continuation of what occurred in the mid-90s) was a turning point.
>1. It is common to use USD because it is convenient, but it is not a standard. There is no structure that forces it.
[...]
>It is not the USD that is powerful, it is the US. The US is a vast economy with a strong rule of law tradition. Common use of USD is a side-effect of that.
I wish the legions who, in online discussions of the US dollar (or almost anything US foreign policy/military-related), always bring up how the US dollar/economy's strength is based on the "petrodollar", how the US goes to war to preserve the dollar's role as a reserve currency, how Russia/China/Saudi Arabia can cause the dollar to crash by using another currency, etc., would understand this.
No, kids, if Saudi Arabia suddenly started selling all its oil in Euros or Yen on renminbi, the US would not send the Sixth Fleet off its shore, any more than it did so to force KSA to use the US dollar to price its wares in the first place. Saudis (and Russians, and Chinese, and everyone else) use the US dollar because they find that a) using it is more convenient than another hard currency like the Swiss franc or British pound, and b) no one else wants riyals, rubles, or renminbi.
[...]
>It is not the USD that is powerful, it is the US. The US is a vast economy with a strong rule of law tradition. Common use of USD is a side-effect of that.
I wish the legions who, in online discussions of the US dollar (or almost anything US foreign policy/military-related), always bring up how the US dollar/economy's strength is based on the "petrodollar", how the US goes to war to preserve the dollar's role as a reserve currency, how Russia/China/Saudi Arabia can cause the dollar to crash by using another currency, etc., would understand this.
No, kids, if Saudi Arabia suddenly started selling all its oil in Euros or Yen on renminbi, the US would not send the Sixth Fleet off its shore, any more than it did so to force KSA to use the US dollar to price its wares in the first place. Saudis (and Russians, and Chinese, and everyone else) use the US dollar because they find that a) using it is more convenient than another hard currency like the Swiss franc or British pound, and b) no one else wants riyals, rubles, or renminbi.
Issue with creating money "at interest" is the interest is never created. This has facilitated all sorts of exploitation over the last 4, 500 years. Slavery, large wars, exploitive business practices, resource extraction, fossil fuels are all encouraged by this need to grab more than is there.
They're called Eddies, choomba.
When the price is the same in euros and dollars even though the exchange rate is wildly different, I call that a eurodollar and have done so for over a decade.
IMO the use in the article isn't notable enough to scoop me.
IMO the use in the article isn't notable enough to scoop me.
Would being a “fundamental building block of the financial market” [1] be enough? CME launched this futures market in 1981.
[1] https://www.cmegroup.com/markets/interest-rates/stirs/eurodo...
[1] https://www.cmegroup.com/markets/interest-rates/stirs/eurodo...
No. Such things are irrelevant to people who are underpaid and live on rent. It's just a concern of an extremely privileged few who never care to interact with people like me. Perhaps the system is important. It can get by with a clunky name for how little use it sees.
It's simply not part of my reality.
It's simply not part of my reality.
The big takeaway for me with the eurodollar deep dives is that the global monetary system creates money (mostly dollars) through loans. These loans are given by parties that are not able, officially, to print dollars but, at the same time, 'print' by loaning them - or rather the promise to pay, in dollars mostly, some sum that the loaner has fractionally. That is, they don't own as many dollars as they're loaning. It's just entries in a database.
In this way, more dollars can enter the global monetary system than can be controlled by the US at all.
This is kind of a revelation. It means that the special power that the US has in printing dollars is only special in that it can never default on the dollars because it can, in the end, print them for real.
I've long thought that the US has had a major advantage in that they can 'tax' trade by requiring the world to hold these dollars that only they can print. They still have something special in their ability to never default on them but not in their ability to print them.