dollarisation

HOME ABOUT ARCHIVE SIDECAR CONTRIBUTORS SUBSCRIBE YOUR ACCOUNT YOUR SUBSCRIPTION LAPSED WITH NLR 126, NOVEMBER–DECEMBER 2020. CLICK HERE TO RENEW. × JOHN GRAHL DOLLARIZATION OF THE EUROZONE? At its initiation in the 1970s, the project of European monetary integration aimed not only at the internal goal of reduced transactions costs. Its broader ambition—in the era of increasing exchange-rate turbulence that followed Nixon’s revocation of Bretton Woods—was to build a currency, a financial system and a Europe-wide economy with greater autonomy from policy and financial measures in the us. Instead, the developments of the past decades have seen the increasing subordination of monetary and financial conditions in the Eurozone to their counterparts in the us. This systematic relegation can be tracked across a wide range of operations. As this paper will explore, subordination is also evident in the security markets, especially the dominance of us bond markets, as well as in the functioning of the ecb, the money markets and the supply of short-term credit.footnote1 Ultimately, this subordination—a process of informal dollarization—threatens to undermine the process of European construction. As corporations are more tightly tied into dollar-based financial markets, it becomes harder for the eu to influence their operations. The social and environmental goals the eu has set itself depend upon an economy with a financial system sufficiently liquid and robust to work in parallel to the dollar-based system, rather than as an appendage to it. Unless Europeans can recover their original ambitions for an independent currency union, these goals will increasingly be beyond its powers. This contribution will examine the different forms eu dollarization may take, including the dynamics at play in the enormously influential fx swap market, and the comparative roles of the Fed and ecb, as well as the eu policies that serve to undermine the bloc’s financial autonomy. But first, some more general considerations on dollarization are in order. Indirect integration Historically, dollarization has typically been a response to hyperinflation, as in the Latin American crises of the 1980s and 90s. Can it also apply to conditions of deflationary pressure, such as those imposed on the weaker Eurozone countries by the structures of monetary union? In an inflationary crisis, as Michel Aglietta and André Orléan argued in La violence de la monnaie, the Central Bank’s money-making is at stake—the heart of the system.footnote2 This centralized dynamic facilitates a rapid move away from the discredited currency and switch to a new monetary system. It is a process that works to the advantage of debtors, eliminating their old-currency liabilities. By contrast, a classic deflationary crisis is de-centralized, dominated by multiple creditors who, in the absence of conditions for profitable investment, press for immediate returns, inducing the liquidation of assets, falling prices and flight to the ‘purity’ of Central Bank reserves or gold. The logic of deflation works slowly—destroying old economic relations long before new ones have developed.footnote3 In the classic case of deflationary breakdown, the general departure from the gold standard in the 1930s, there was no common move to an alternative until 1944, at Bretton Woods. Today, the salience of the dollar as an alternative and the unresolved deflationary pressures arising from the workings of the Eurozone may be inducing a form of dollarization that operates through the slow erosion of certain monetary functions. This need not be a unified process; one might expect a turn to the dollar to be earlier and more complete in the weaker Eurozone economies than in Germany. The argument here is that dollarization is operating through a process of ‘indirect integration’, by way of the common subordination of member states to us institutions. For Europe, this would be nothing new. Washington played a major role in the birth of the European integration project,footnote4 and there have been numerous examples since. After the dissolution of the European Payments Union (at Britain’s insistence) in 1958, de facto monetary integration operated through the Bretton Woods exchange-rate regime: the franc was tied to the Deutschmark because both were tied to the dollar. (De Gaulle’s bid for monetary independence collapsed with the événements of 1969.) Similarly, the irony of Eurocrat discourse about the ‘European company’ was clear to many commentators: the corporations that moved most fluently across the ec’s internal borders and were least tied to particular locations were, in fact, American multinationals. ‘The villainy you teach me I will execute, and it shall go hard but I will better the instruction.’ American financial practices, often imperfectly understood by their European imitators, have had enormous influence on the behaviour of both private and public actors in the eu. Consider the breath-taking leverage ratios achieved by Eurozone banks in the pre-2008 subprime/securitization bubble, which easily surpassed those of their us counterparts. Again, just when the shareholder-value drive was meeting some determined judicial and legislative resistance in the us, the European Commission went all out for a directive that would abolish any effective defence against hostile takeovers. Though the ecb carefully monitors the overseas use of the euro, it always insists that it has no external policy objectives. The absence of an active global policy reflects, as do so many of the dysfunctional aspects of the monetary union, the parochialism of the German authorities, now reinforced by the equal commitment to Biedermeier styles by the so-called New Hanseatic League. This is a damaging abdication, weakening Europe’s potential influence on the evolution of global financial institutions and practices. But it has also introduced incoherence into its internal monetary policy. An ecb report on the international use of the euro estimates the loss of efficacy of monetary-policy instruments due to the growing interpenetration of us and Eurozone financial systems at around 5 per cent.footnote5 It is telling that the ecb goes on to suggest that this loss is compensated by moves in the dollar–euro exchange rate, induced by its interest-rate moves. Countries that implement monetary policies by targeting their dollar-exchange rates are already in a clearly subordinate position: there is no Rodrikian ‘trilemma’ for them—no conflict between globalization, sovereignty and democracy.footnote6 Their open capital accounts have already eliminated monetary independence, because they can never treat their exchange rates as a matter of indifference. On the contrary, regardless of the formal nature of the policy—float, crawling peg, or whatever—they have to set domestic interest rates in function of foreign-exchange pressures.footnote7 Turkey in 2018 was a case in point. Indeed, much of the world is already partially dollarized. The us will not be too constrained by capital outflows to countries that make substantial use of the dollar—there is no real threat to convert dollar balances to rival stores of value. This impunity is partly an effect of scale: the more partially dollarized countries there are, the weaker the external constraint on us finance and us macro policies. We have been waiting a lifetime for these chickens to come home to roost; as with the sterling balances of the British empire, the very possession of hegemony leads to its reinforcement. A recent study from the Bank of International Settlements examined the world economy through the lens of ‘currency zones’, defined by the relative alignment of 172 currencies with the dollar, euro or yen. It found that whereas the us economy produces 20–25 per cent of world gdp, the ‘dollar zone’ produces 50–60 per cent of it; by contrast, the eu produces 15–20 per cent and the ‘euro zone’ 30 per cent of world gdp.footnote8 In the Eurozone two important monetary functions, transnational funding and collateral provision, are already performed by the dollar. Both of these involve the market in fx swaps, which has grown to staggering dimensions and fulfils a key function in the global economy—that of enabling the transfer of monetary resources across currency zones. The fx swap market makes it possible to substitute dollar assets, as collateral, for assets in local currencies, and to facilitate the use of funds raised in one currency zone to finance investments in another—but currently in a highly asymmetric way, which privileges dollar funding. In the us, fx swaps are used essentially for international cross-currency transactions—they would not typically be used within the domestic money markets. In Europe, by contrast, the ecb reports fx swap transactions alongside those relating to other internal money-market instruments, such as repos.footnote9 It seems that dollars are being used as collateral in internal eu credit transactions, both because other forms of collateral are scarce and because of the relatively favourable regulatory treatment of fx swaps as against euro repos. Indeed, fx swaps may be the most important instrument within Eurozone credit markets: turnover is higher for repos, but when transactions are weighted by maturity, it is clear that much more capital is raised in the Eurozone by fx swaps than by repos. Given the scale and liquidity of American capital markets, and the fragmentation of non-dollar markets into several currency zones, the enormous growth of fx swaps has highly asymmetric effects, transmitting us money-market conditions to other countries, but not vice versa. Abundant us liquidity spills over to all participants in the global financial system, mitigating inflationary pressure at home by exporting it to other countries, while in the case of a us liquidity squeeze, the basis spread is forced up and non-us borrowers are cut off from dollar credit, once again exporting much of the tension to other players.footnote10 The hypertrophy of foreign-exchange markets, at first misinterpreted as evidence of speculation, is in reality a powerful mechanism of us-led globalization. As a bis paper has noted: The dollar reigns supreme in fx swaps and forwards. Its share is no less than 90 per cent, and 96 per cent among dealers. Both exceed its share in denominating global trade (about half) or in holdings of official fx reserves (two thirds). In fact, the dollar is the main currency in swaps/forwards against every currency. For instance, it predominates in forwards in the Norwegian krone, the Swedish krona and the Polish złoty, currencies that trade in the spot market more against the euro.footnote11 In other words, the close trading relationship of Poland, Norway and Sweden to the Eurozone is compatible with dollar predominance in their financial relations. Bond market asymmetries The situation of finance in the eu relates to a general global shortage of ‘safe assets’ since the financial crisis. While the primary cause of this shortage has been the downgrading of subprime and similar debt after the crisis, the disruption of Eurozone bond markets is also a significant factor. A recent study argues that while the downgrading of mortgage-backed dollar-securities and similar claims removed around $9 trillion ‘safe’ assets, the downgrading of Eurozone sovereign debt—they give figures only for Italy and Spain—was also a significant factor, accounting for $3 trillion of claims (see Table 1).footnote12 Article figure NLR125-Grahl-Table-1 In part, however, the problem also relates to the German government’s petit-bourgeois views on credit: borrowing is bad, so there should be a law against it—preferably one with constitutional force. Germany will cling to the Schuldenbremse and misbehaving governments in the Club Med will have to pay a risk premium on their bonds, even though this complicates their use as collateral and makes the pricing of other securities more difficult. (The ecb currently holds so much Eurozone debt that it strains credulity to suggest that bond-yield differentials are simply a matter of market forces; the ecb has become the market.)footnote13 For 20 years—until the small, though not insignificant, step taken at the height of the coronavirus crisis this summer to create a mutualized-debt device for an eu recovery fund—every proposal for bond issuance at European level has been blocked by Berlin and like-thinking governments. These policies have contributed to the worldwide shortage of safe assets. In these conditions, the gigantic advantage of dollar-based finance over finance in the Eurozone was illustrated by a recent imf paper that examined the exceptional demands for good collateral that might arise from a specific financial emergency: the breakdown of one or more of the central counterparties established since the global crisis, in the hope of reducing the risks of derivative trading. Its findings contrast the gulf between us and eu capacities to respond to such an eventuality: While in Europe, hqla [high-quality liquid assets] continue to be in short supply (Bund repos are in the negative 50 bps range), the opposite is true in the us, where gcf (collateral rates) is close to 2 per cent (200 bps) at present. us dollar-denominated hqla should be able to satisfy much of the worldwide hqla demand.footnote14 A standard response to the limitations of European bond markets is to recall the salience of bank finance in most eu member states. It is doubtful whether this objection still has the force it once did. The inanition of eu banks, after their misadventures in the subprime and similar markets, has become a frequent complaint. For this reason, two Federal Reserve economists have argued that, although bond-market access was not important for European enterprises in the past, it may be becoming so because of new constraints on the banks.footnote15 If this is the case, the underdeveloped nature of eu bond markets may be becoming an obstacle to European investment. Supremacy of scale In the eu political pressures drastically curtail the issuance of high-quality debt and restrict and complicate official support for bond prices.footnote16 For example, the ecb is required to purchase the government debt of emu member states in proportion to their gdps, meaning that its qe exercises involved completely dysfunctional accumulations of Bunds. Negative yields now prevail for much German debt, and these can even go below the ecb’s deposit rates; non-bank actors are not permitted to hold ecb deposits and seem often to prefer direct claims on the German government to deposits with commercial banks.footnote17 Regulatory and other administered constraints on banks and institutional investors may account for some disturbances. Nevertheless, the crash of the European repo market to massively negative yields in December 2016 suggested that institutions which need to hold and trade bonds have to cope with a very fragile and volatile environment. In that, admittedly extreme, episode some investors were prepared to lend money at –6 per cent in order to get hold of high-quality collateral.footnote18 The actors most affected by lack of good collateral and thus illiquidity in the repo market are institutional investors, using reverse repos to acquire government debt on a short- or long-term basis. To the extent that us mutual and pension funds are not similarly handicapped, they seem well positioned to capture more of the European savings market. A basis spread that is consistently adverse for European investors gives dollar-based banks and fund managers an advantage not only in dollar markets, but also in the Eurozone. The ‘law of one price’—an idealized account of the real tendency for arbitrage to reduce differential prices on similar assets—lost one of its few remaining empirical supports when forward exchange rates ceased to be priced on ‘risk-free’ interest-rate differentials. What began as a crisis phenomenon, reflecting suspicion of counterparties and perceived exchange-rate risks, has now become an established and continuing feature of international financial relations. The explanation of the basis spread, which makes it profitable to swap dollars for euros, and much less so to take the other side of the same swap, is extremely technical and beyond the capacities of the present writer. But the paper cited above from the Bank of International Settlements suggests that the following simple account may be adequate for a broad overview.footnote19 According to the bis economists, the basis spread can be regarded as arising from two forces. On the ‘demand’ side, there is massive pressure from European investors for exposure to dollar-denominated assets. This pushes up the spot rate for the dollar, while the necessary hedging of euro advances pushes down the dollar’s forward rate. Why do us banks not take advantage of the resulting arbitrage opportunity to lend dollars and gain a risk-free profit on the return leg of the swap from the cheapness of forward dollars? The simplest view is that there is a ‘supply’ constraint arising from the balance-sheet implications of fx swaps for us banks.footnote20 Since the global crisis, and the reawakened concern with leverage ratios which followed, any asset appearing on a bank’s balance sheet can be regarded as having a shadow price, to the extent that it tightens actual or potential regulatory constraints. (Some accounts suggest that us regulators go beyond Basel rules in their discouragement of fx positions, even the closed positions arising from fx swaps; Claudio Borio and his colleagues in particular, argue that large fx positions represent a form of debt inflation.)footnote21 In recent years spreads have fluctuated (Figure 1). After reaching some 50 basis points on 3-month dollar-euro swaps in 2018, they narrowed somewhat before widening substantially during the corona crisis. The latter development illustrates the paradoxical effects of currency supremacy. The us is probably more exposed to the crisis than other countries, both because of the lack of health care for a substantial fraction of its population and because of its late, insufficient and disorganized response. But these factors—negative for the dollar—have been completely outweighed by the attractions of the dollar as the most widely traded and understood currency in the course of the crisis. A similar pattern occurred at the outbreak of the First World War. Britain was menaced, but the pound sterling strengthened, because a general crisis increased the attraction of the key currency of the time. Article figure NLR125-Grahl-Figure-1 Financial analysts have suggested that the cheap foreign finance of the us government deficit may be reaching certain limits: dollar long rates are too low to attract foreign investors, given that short rates are pushing up the cost of dollar swaps; some move away from the present inverted yield curve is going to be needed.footnote22 However that may be, the persistence of significant basis spreads against the euro works directly against euro funding of any positions, inside or outside the monetary union (Figure 2). Investors from the us and third countries will tend to find it cheaper to borrow dollars and swap them for euros, even when they are funding Eurozone positions. Here again, the logic of the market points to a narrowing in the autonomy of the Eurozone. Article figure NLR125-Grahl-Figure-2 ECB as a branch of the Fed Relations between central banks in the dollar and euro economies reinforce the notion of a gradual subordination of European finance. Official fx swaps between the Fed and other major central banks around the world emerged first as a crisis phenomenon, but were given a continuing institutional form when standing facilities were introduced in October 2013. The crisis issue was, originally, an American problem. Foreign, especially European, banks went into the 2008 crisis loaded with dollar assets, including an unknown proportion of the most toxic varieties. Funding for these holdings became problematic as money markets seized up, and us institutions became suspicious of foreign players. Since the Fed did not provide refinance for foreign banks in the same way as for domestic ones, there was a risk that European, Japanese and other non-us banks would start to dump their dollar-denominated assets, making the crisis more acute. The response was an official fx swap: the Fed lent dollars to the ecb, which the latter used to refund the dollar positions of the Eurozone banks.footnote23 Both central banks clearly had an interest in the success of this exercise—the Fed, in avoiding further asset-price collapses; the ecb, in preserving the liquidity and solvency of major Eurozone banks—but primarily it was an extraterritorial extension of the us stabilization policy. ‘In general, the issuing central bank contributes to defining the pricing terms at which liquidity is provided by the home central bank to its counterparties, in order to avoid interference with the issuing central bank’s monetary policy implementation’, as the ecb’s monthly bulletin put it.footnote24 With other major central banks around the world carrying out this distribution of ‘synthetic’ dollars in a synchronized way, the official swaps appear to constitute a further move towards the integration of monetary policies under us auspices. Early speculation that the Trump Administration would annul the policy was not borne out—the arrangement in any case does not conflict with the priority of ‘America First’—and the swaps were expanded in March 2020 under the impact of the coronavirus. The conjecture here of a gradual loss of monetary and financial autonomy in the Eurozone is admittedly tentative. The zone is immensely rich, and, in dealing with the financial crisis, the ecb under the active presidency of Draghi displayed a formidable capacity both for self-defence, in the massive deployment of Central Bank resources, and for institutional development, in its moves toward a more centralized supervisory and regulatory structure.footnote25 There remains a question over how far his successor will be ready to depart from the Bundesbank’s notions of orthodoxy. Some might point to shifting positions within Germany itself, as evidenced by Merkel’s pivot to a mutualized-debt instrument for—naturally, conditional—grants to the Mediterranean countries hardest hit by the covid-19 crisis. The argument here has also involved significant extrapolations. The balance sheet of the Trump Administration is important: it is consonant with the hypothesis above to stress the unique financial strength of the us, which renders recent erratic and maladroit policy moves feasible; it would be counter to the main argument here, however, if dysfunctional policies in Washington should so weaken the us financial structure as to call dollar hegemony into question. But so far there has been no evidence of that; indeed, the readiness of the Trump Administration to ride roughshod over the interests of allied governments may even have strengthened dollar hegemony. A challenge from Europe looks less likely than ever, while any threat to the us from China will not, in any near future, involve a financial challenge. Meanwhile, it is hard to think of a financial function where the Europeans are not potentially exposed to a gradual imposition of us practices and standards. Trump’s support for financial deregulation illustrates the point: if the post-crisis structure embodied in Dodd–Frank is undermined in the us, then the elaborate regulatory structure introduced in the eu will come under strain. There was already evidence under the Obama Administration that the us was not prepared to harmonize financial regulation with the eu.footnote26 Finally, however, if the Eurozone is indeed being slowly dollarized, that process provides no comfort for the various projects for member-state departures from the monetary union. Should the Eurozone break up, the most probable outcome is galloping dollarization in the fragments—immediate in the smallest and weakest of these, but still marked even in France and Italy. The performance of British finance can stand as a warning to those in search of national monetary sovereignty. The status of the City of London, playing a role in most large-scale international operations, has failed to safeguard the British currency, which is only propped up by consistent and substantial risk premiums on sterling-denominated assets. Very occasionally, a divergence of euro (formerly Deutschmark) and dollar interest rates makes it possible for sterling rates to lie between the two: this was the case briefly during the 1979 Volcker shock and in the early 1990s, during the post-unification frenzy of the Bundesbank, which squeezed longer and harder against inflation below 5 per cent than Volcker had against inflation of around 20 per cent; in the latter case, Britain could use a premium over dollar rates to secure a soft landing after its departure from the ems. But these were very brief exceptions. The norm is that British rates have to be higher than those in both Germany and the us (Figure 3). Anything else would threaten a collapse on the fx markets. Article figure NLR125-Grahl-Figure-3 This is the record for a large economy with unique financial strengths. What could be expected for Italy, Cyprus or Latvia if any of them abandoned the euro? The Eurozone is still large and powerful enough to represent a partial exception to Hélène Rey’s finding that there is no trilemma in monetary policy—that the straight choice is between open capital accounts and monetary independence; a dilemma from which floating exchange rates fail to provide an escape.footnote27 It is true that some far-Eastern economies such as South Korea (though not Japan) have so far escaped tight constraints in their international positions. The price for this is a massive current-account surplus, way beyond anything achievable by the weaker economies of the eu. Turkey in 2018 can stand as a good example of what might be expected in the event of a Eurozone break-up. It tried to use an autonomous external policy to encourage growth. Foreign pressure—dominated by the policies of the us—soon brought it to heel and compelled Ankara to sacrifice domestic employment to external stability. For those promoting the various ‘exits’: de te fabula narratur. Hanging separately only offers a somewhat swifter dénouement than hanging together. Only a unified approach, deepening both the economic and the political coherence of the monetary union, offers a possible assertion of European autonomy. 1 An earlier version of this paper was presented to the Nicos Poulantzas Institute workshop, ‘The Current State of Finance in the eu: Prospects and Alternatives’, Athens, 28–29 March 2019. 2 See Michel Aglietta and André Orléan, La violence de la monnaie, 2nd edition, Paris 1984, pp. 89–123; extracted in Pierre Alary et al., eds, Théories françaises de la monnaie, Paris 2016, pp. 67–115. 3 Aglietta and Orléan, in Alary, ed., Théories françaises de la monnaie, pp. 108–14. 4 Annie Lacroix-Riz, Aux origines du carcan européen: La France sous influence allemande et américaine (1900–1960), Paris 2014. 5 ecb, ‘The International Role of the Euro’, July 2017, pp. 7–8. 6 Dani Rodrik, The Globalization Paradox: Why Global Markets, States and Democracy Can’t Coexist, Oxford 2011. 7 See Hélène Rey, ‘Dilemma, Not Trilemma: The Global Financial Cycle and Monetary Policy Independence’, nber Working Paper 21162, May 2015 (revised February 2018). 8 Hiro Ito and Robert McCauley, ‘A Key Currency View of Global Imbalances’, bis Working Paper 762, 20 December 2018. The authors go on to note that high us deficits—for example in 2007, when many feared the dollar might collapse—were offset by surpluses in other regions of the ‘dollar zone’ (notably China): ‘Global imbalances differ from a currency perspective.’ 9 See, for example, ecb, Euro Money Market Survey, September 2015. 10 This is not a new phenomenon: compare the drastic consequences for European dollar debtors of the us liquidity squeeze that followed the 1929 Wall Street crash. 11 Claudio Borio, Robert McCauley and Patrick McGuire, ‘fx Swaps and Forwards: Missing Global Debt?’, bis Quarterly Review, September 2017. 12 Ricardo Caballero, Emmanuel Farhi and Pierre-Olivier Gourinchas, ‘The Safe Assets Shortage Conundrum’, Journal of Economic Perspectives, vol. 31, no. 3, Summer 2017. 13 The apparent ability of big eu banks to manipulate Eurozone bond yields—hardly likely to inspire investor confidence—may in fact suggest the illiquidity of the market. See ‘eu accuses eight banks of collusion in sovereign bond market’, Financial Times, 31 January 2019. 14 Manmohan Singh and Dermot Turing, ‘The Morning After: The Impact on Collateral Supply after a Major Default’, imf Working Paper no. 18/228, October 2018. See also ‘Central Counterparties Resolution: An Unresolved Problem’, imf Working Paper no. 18/65, March 2018, where the authors give a sense of the scale on which these central counterparties (ccps) act: ‘Taking European ccps, the two largest clearers of interest rate products are Germany’s Eurex Clearing ag ($1.7 trillion open interest position) and uk’s lch.Clearnet Limited ($164 trillion open interest position); in the us, cme Clearing, has an open interest position of $16 trillion.’ As they note, this compares to Germany’s gdp of $3.4 trillion, uk gdp of $2.5 trillion and us gdp of $20 trillion: p. 14. 15 Bastian von Beschwitz and Conor Howells, ‘Are Euro-Area Corporate Bond Markets Irrelevant? The Effect of Bond Market Access on Investment’, Board of Governors of the Federal Reserve System, International Finance Discussion Papers no. 1176, August 2016. 16 Caballero et al., ‘The Safe Assets Shortage Conundrum’. 17 In 2019 the Financial Times gave the following yields on German benchmark bonds: maturity October 2020, bid yield –0.61; February 2025, –0.25; July 2028, +0.06; August 2048, +0.77. 18 See Andy Hill, ‘Closed for Business: A Post-Mortem of the European repo market break-down over the 2016 year-end’, icma, February 2017. Hill gives a very interesting list of factors behind the repo market breakdown: shorting of bonds; us banks taking advantage of wider basis spread to invest in euro assets; qe (although the ecb did attempt to mitigate the shortage it was causing); tighter bank regulation impacting end-of-month portfolios. 19 Borio et al, ‘fx Swaps and Forwards’. 20 This constraint exists despite the relatively favourable treatment of fx swaps, compared to repos, in the Basel iii regulatory framework. 21 Borio et al, ‘fx Swaps and Forwards’. 22 Zoltan Pozsar, ‘Lost in Transmission’, Global Money Notes, no. 20, Crédit Suisse, 15 February 2019. 23 The ecb did not use fx swaps but rather repos in this refunding. Haircuts of some 20 per cent were imposed during the crisis, though these were later reduced. 24 ecb Monthly Bulletin, August 2014, p. 70. An interesting question arises as to the use or otherwise made of the counterpart currency, for which the Fed had no particular need: us banks had no problem funding their non-dollar assets. In the case of Japan, a special bill was issued in which the Fed could conveniently park its yen. It is not clear whether the ecb has followed an analogous procedure. 25 Stefaan De Rynck, ‘Banking on a Union: The Politics of Changing Eurozone Banking Supervision’, Journal of European Public Policy, vol. 23, no. 1, 2016. 26 See the assessment of the House of Lords Select Committee on the eu, ‘The Post-Crisis eu Financial Regulatory Framework: Do the Pieces Fit?’, London, 2 February 2015. 27 Rey, ‘Dilemma, Not Trilemma’. BACK TO ISSUE 125•Sept/Oct 2020 SHARE Facebook Twitter Email Download PDF BY THIS AUTHOR ‘Beyond Redistribution?’ ‘A New Economics’ ‘A Capitalist Contrarian’ ‘Measuring World Disorders’ ‘The Sway of Finance?’ ‘Globalized Finance’ ‘Renewing the Left’ ‘Economies Out of Control’ ‘The Cost of Neo-Liberal Europe’ RELATED ARTICLES Wolfgang Streeck, ‘Why the Euro Divides Europe’ Susan Watkins, ‘The Political State of the Union’ Michel Aglietta, ‘The European Vortex’ ABOUT HISTORY NEWSLETTER DONATE CONTACT SUBMISSIONS PRIVACY ACCESSIBILITY FOLLOW US TWITTER FACEBOOK RSS NEW LEFT REVIEW 6 MEARD STREET, LONDON W1F 0EG UNITED KINGDOM +44 (0)20 7734 8830 © NEW LEFT REVIEW LTD 2021