Anecdotes on Eurodollar ‘Money Supply'; Part 1

I often write about the rise and fall of the eurodollar standard in very abstract terms, largely because most of what occurs there is hidden, opaque and/or terribly abstract. The difficulty is in trying to define and describe “money” under just such a pliable system, a task not easily solved by current conventions. For instance, it was the trend in the middle of the 1990’s which fused finance and money together, making them inseparable so that what mattered about asset bubbles and credit production was not cash and certainly not Federal Reserve notes nor the ledger “reserve account” at the Fed. Instead, liquidity and even money itself was transformed into a multi-dimensional mélange of bank balance sheet factors, all of which conspire to make traded liabilities the basis for modern “money.”

In other words, this is how the dollar became the “dollar.” And we can actually observe that transformation if only in discrete, whittled down pieces exposed individually within the context of the overall paradigm. I have used the Swiss banking system and their massive allocation to “dollars” especially in money dealing activities as just one such glimpse into the foreign extract of the eurodollar system. And while the eurodollar system was and remains highly foreign in nature (on multiple levels) the domestic transformation was no less significant and useful to understanding where we are now; and might “have” to go next.

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I am going to use just two “banks” as anecdotes that almost perfectly describe eurodollar building and then decaying. I picked these two for specific reasons but it could have been any of their peers as the process is immediately recognizable in every “bank.” I use the scare quote on the word bank in the same manner as I use it on “dollar”, as what these institutions are now

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