- Financial Survival Network
- Posts
- There’s a Herd of Elephants in the Room
There’s a Herd of Elephants in the Room
by Alasdair MacLeod Gold Money
Among the many problems currencies and markets face, there is one which is undocumented: the eurodollar market, which is yet another very large elephant in the room. This article quantifies eurodollars and eurodollar bonds, which are additional to US money supply and credit.
Research by the Bank of International Settlements puts this market at $93 trillion, of which on-balance sheet debt (i.e., customer deposits) of non-US banks is $15 trillion, a sum which should be added to US M2 money supply of $21 trillion for a truer picture of total dollar bank credit. Only a small of this debt is in other currencies.
In this article, I describe the origin of eurodollars and why they have grown to such an enormous quantity. They introduce unrecognised risks to capital markets, and particularly the dollar at a time of growing financial instability. While the factors leading to a Triffin-style crisis are already in place, the unwinding of eurodollar credit will be an additional, unexpected factor.