On May 21, 2005, David Foster Wallace gave a commencement speech at Kenyon College titled "This Is Water." It begins with a short story about two fish:
There are these two young fish swimming along, and they happen to meet an older fish swimming the other way, who nods at them and says, "Morning, boys. How's the water?" And the two young fish swim on for a bit, and then eventually one of them looks over at the other and goes, "What the hell is water?"
The two young fish are clueless to the fact that they are floating in, and surrounded by, water. "The point of the fish story is merely that the most obvious, important realities are often the ones that are hardest to see and talk about.", Wallace said.
It turns out it's not just fish that are clueless about their surroundings.
Some things surround us, of which we are unaware. Important things. Consequential things. Yet, we don't see them.
There's one such thing, let's call it a system, that affects our lives in many ways, but few people know of its existence and the ones that do rarely understand it. Even fewer people talk about it. Yet, it's a system whose importance cannot be exaggerated.
This system is hidden in plain sight but likely escapes our attention because of its decentralized and complex nature. It influences everything from international trade and finance, to public policy and geopolitics. It has started - and stopped - wars. It has shaped governments and brought countries to their knees. Its effects are felt by everyone.
When it breaks, we realize something is wrong, but we're not exactly sure what. We are like fish in the water.
I'm talking about eurodollars.
What are eurodollars?
A eurodollar is simply a dollar on deposit outside the US. Period.
It does not have to be on deposit in Europe, just outside the US. A dollar on deposit in Japan is still a eurodollar.
And it's not just the dollar. There are many eurocurrencies. Any currency on deposit outside its home country is a eurocurrency. A Mexican peso on deposit in Australia is a europeso. A Swiss franc on deposit in Canada is a eurofranc. And yes, a euro on deposit in China is a euroeuro.
Eurodollars have nothing to do with the euro, the currency of the European Union. The name is a curious historical accident that only deepens the confusion, but we'll get to that later.
Who cares?
What happens in the eurodollar market affects everyone, either directly or indirectly. You may not know it, but the eurodollar market is all around you. Like fish swimming in the water, you may not realize it's there, but it affects you nonetheless.
How?
First, it's the oil that greases the global economy. The vast majority of trade is settled in dollars, and the eurodollar market is how most corporations and governments find dollars. Due to the quirks of what is called fractional reserve banking, a bank that receives a dollar on deposit can lend a fraction of that dollar to a third party. So the eurodollar market is, in essence, a funding market. Without it, international trade and commerce would grind to a halt. Today's vast, extended and complex supply chains would suffer, and, consequently, consumers around the world would face shortages in everything from food and medicine to cars and computer equipment.
Second, it's everywhere and nowhere at the same time. It's a decentralized market. Any bank outside the US that decides to take dollar deposits and provide dollar funding is part of the market. Any company or government that chooses to incur dollar funding outside the US is part of the market.
Third, it is not subject to regulation. The US Treasury and the Federal Reserve are the only entities responsible for printing and regulating the US dollar, but their jurisdiction and responsibilities end at the US border. There's no one set of rules that all participants must observe. An assortment of practices has developed over time, from the bottom up. In essence, each participant decides how to engage with the market and under what guidelines, limited only by its domestic banking and financial regulations. When trouble arises, there's no central authority to bring order to the market.
Every time a problem arises, the Fed must decide whether to leave the market or intervene, but it is never under the obligation to help correct imbalances. However, this power to step in with unlimited dollar reserves has proven to be a powerful geopolitical tool for the US government, just as influential, if not more so, than its military power.
Finally, it's big. To say that the eurodollar market is enormous is an understatement. But it's also true that, due to its decentralized and unregulated nature, nobody knows its exact size. Some estimates say that it's larger than the US domestic dollar market, or 18.4 trillion dollars (using M2 money supply as a proxy). And that's just the eurodollar. Again, it's big.
How did this beast come about?
The origins of the eurodollar are shrouded in mystery.
It all began after World War II.
In 1945 Europe and other parts of the world were devastated. The war had destroyed almost all its infrastructure, from roads, bridges, and tunnels, to factories, universities, government buildings, and even civilian housing.
The population itself was also devastated. Sixty million people had died in the war, around twenty million of which were European. The majority of those deaths were young men of fighting age, leaving a sharp demographic dent.
On the other hand, the US had suffered mostly military casualties, with a few civilians deaths on board transatlantic vessels. But the country's infrastructure lay intact. New York had already surpassed London as the world's financial center, with the US being net creditor since World War I.
Something needed to be done to get Europe back on its feet.
Even before the war ended, in July 1944, delegates from the 44 allied nations gathered at the Mount Washington Hotel in Bretton Woods, New Hampshire, to agree on a new financial and monetary order. Among other things, the attendees agreed that the US dollar would be backed by, and convertible to, gold at a rate of $35 per ounce. The other countries would, in turn, hold their reserves in, and fix their exchange rate to, the US dollar. From that point on, the US dollar would be the world's reserve currency, and a significant portion of the world's countries entered into a de facto gold standard.
Bretton Woods also created other mechanisms and institutions, such as the IMF and the International Bank for Reconstruction and Development (now part of the World Bank), to help correct imbalances between countries. An international operating system was in place.
The Soviet Union declined to ratify the agreement, arguing that this gave undue power to the US and that the new institutions were nothing more than "branches of Wall Street."
A few years after the war had ended, the US implemented the European Recovery Program — better knows as the Marshall Plan. This initiative transferred $12 billion — about $129 billion in 2020 dollars — to European countries for reconstruction and economic recovery. The goal of the plan was to help Europe rebuild, return to prosperity and, importantly, stop the spread of communism.
These treaties and initiatives had several consequences:
First, demand for US dollars increased as governments worldwide began accumulating reserves to back their local currencies.
Second, the use of US dollars increased as the funds from the Marshal Plan moved through European economies.
Third, as European governments and companies found themselves flush with US dollars, they parked those dollars in US Treasury bonds, in effect, lending that money back to the US.
Meet Eurobank
In 1915, the Russian Moscow Narodny Bank, or MNB for short, set up a subsidiary branch in London to finance trade between Russia and the UK. After the Russian revolution and subsequent nationalization of banks by the communist government, the London branch managers decided to protect their operation by incorporating it as a British legal entity. In October 1919, they established the Moscow Narodny Bank Limited.
The bank continued to operate, financing trade between the Soviet Union and the UK and within the counties of the communist block.
In 1956, after violently suppressing revolts in Hungary, the Soviet Union feared that the US government would confiscate its dollars on deposits at US banks as retaliation. They decided to transfer their dollar holdings to MNB Limited, and then have that bank deposit them in US financial institutions. This move barred the US from confiscating the funds because they effectively belonged to MNB Limited, a British bank.
However, not all the funds transferred to MNB Limited made their way to US banks. A portion was transferred to another Soviet bank in Paris, called Banque Commercial pour l'Europe du Nord, otherwise known in the industry as Eurobank. Eurobank took some of those dollars and lent them to a third party, effectively creating the first eurodollars.
The name eurodollar stuck because of the bank's nickname and its telex address, "euro."
A Parallel Currency
The use of eurodollars to finance international trade took off in the 1960s because it was, in essence, a parallel currency.
Since gold backed the US dollar, trade and current account imbalances were settled by shipping bullion between trading partners. Since eurodollar activity took place outside this legal and regulatory framework, it was free from the need to fix imbalances with actual gold. It was, in effect, a ledger currency. You might even say it was the first digital currency because it existed primarily within the accounting books of participating banks and corporations.
The new systems worked well while Europe and Japan rebuilt their economies. As these economies recovered and grew, they began to compete with the US. From 1950 to 1969, the US's share of world economic output fell from 35% to 27%.
Meanwhile, the US was dealing with problems of its own. It faced a balance of payments deficit, inflation and ballooning public debt, which had been growing steadily, mostly due to the war in Vietnam. The dollar was losing the confidence of the US's trading partners.
Soon, grumblings began.
The French did not like the Bretton Woods accord from the beginning, calling it "America's exorbitant privilege." American economist Barry Eichengreen summarized international sentiment when he said: "It costs only a few cents for the Bureau of Engraving and Printing to produce a $100 bill, but other countries had to pony up $100 of actual goods in order to obtain one". As the dollar's value got more and more misaligned, America's trading partners began looking for an alternative.
In 1965, French President Charles de Gaulle announced his country's intention to exchange its dollar reserves for gold at the official rate of $35 per ounce. Other nations followed suit. A run on the dollar had begun.
By 1966, US gold reserves had fallen to $13.2 billion, while its trading partners' had increased to $14 billion. Of those reserves, only $3.2 billion were available to support foreign dollar holdings since the rest covered domestic holdings.
In May 1971, West Germany left the Bretton Woods system altogether and allowed its currency to float freely. Soon Switzerland left the accord. As American historian William Glen Grey wrote in 2007:
The Bretton Woods agreements were based upon two fundamental premises: the provision [...] that the dollar was fixed to the price of gold at a ratio of $35 per ounce, and the requirement that governments maintain a fixed and agreed parity vis-à-vis the dollar (i.e., gold). The free convertibility of dollars into gold, and the ready exchange of other currencies into dollars, lent predictability to international commercial transactions and facilitated a mind-boggling of trade in the first two post-war decades. Unfortunately, official parities did not always represent a realistic exchange rate between two countries. Inflation, budget deficits, and trade imbalances undermined the perceived value of many currencies; conversely, those few counties with low inflation and tight fiscal discipline -- such as Germany and Switzerland -- saw the effective value of their currencies rise.
As gold redemption by foreign governments continued, the US Congress recommended the Nixon administration to devalue the dollar against gold. Instead, Nixon decided to respond with more drastic actions. First, suspend dollar convertibility to gold; second, impose a 90-day freeze on wages and prices in an attempt to control inflation; finally, set a 10% tariff on all imports to make American products more attractive in the domestic market.
The first of Nixon's three actions, known as the "closing of the window," ended the Bretton Woods system and the gold exchange standard. Previously, all currencies derived their value from the dollar, and the dollar derived its value from gold. Now the crucial link to gold had been severed, and all currencies became fiat currencies. Soon after, all currencies would trade freely against one another, bringing volatility and complexity to world markets.
But the US didn't care. It was now free from its gold reserve chains. It could freely print dollars without having to worry about keeping enough gold reserves to cover each one. When debts came due, it could just print the money and pay.
But there was a problem. Foreign creditors weren't as enthusiastic about holding US debt now that they were getting repaid in paper money backed by nothing. Also, what was the point of keeping large amounts of dollar reserves?
The Nixon administration worried that demand for dollars would fall and that the US would lose its privileged position as the sole purveyor of the world's reserve currency.
Let's Make a Deal
In 1973, Nixon's Secretary of State, Henry Kissinger, negotiated a sweet deal with the House of Saud: Saudi Arabia would henceforth price all its oil sales exclusively in US dollars, and invest surplus dollars in US Treasuries. In return, the US would sell arms and military equipment and assured protection for the Kingdom from its foes, including Israel. Soon, other OPERC members followed suit.
It was a masterstroke for the US.
From that point on, anyone who needed to buy oil first had to exchange domestic currency for US dollars, which meant an endless demand for dollars. Since oil-producing countries were investing their excess dollars into US Treasuries, this deal also ensured demand for its debt. The US could theoretically acquire oil using dollars that it could print into existence.
More than anything, this deal helped secure the dollar's role as the world's international trade currency. It ensured that everyone would need dollars at some point. It all but guaranteed sufficient demand for its debt and securities, and it safeguarded the dollar's place as the world reserve currency, even if it was no longer backed by gold.
Today the dollar still is the currency of trade. All commodities are quoted and paid in US dollars. America's financial system is the deepest and most sophisticated in the world, and most international transactions involve the use of the dollar, even if no US parties are involved. If a Japanese company wishes to invest in Mexico, its local bank is unlikely to hold a lot of pesos; it is likely, however, to hold a lot of dollars, which the company can acquire and exchange for pesos with a Mexican bank. The US dollar, and its bastard brother, the eurodollar, are an integral part of the world's economic operating system.
Limitless Growth
As mentioned earlier, the eurodollar market is a funding market. Non-US banks provide dollar-denominated loans to individuals, governments, and corporations worldwide, subject only to their local regulations. These regulations can vary widely from country to country, with no universal framework for what is, in fact, a global market.
Why would a non-US party want a dollar loan?
First, many manufacturers need dollars to acquire commodities or US-made components. Even goods manufactured outside the US are often prices and settled in dollars.
Second, interest rates on dollar-denominated loans are usually lower than those on local-currency debt. Of course, the advantages of lower rates only hold if the exchange rate between the local currency and the dollar remains relatively stable. Even if it doesn't, there are tools to hedge currency risk.
Finally, many countries' financial system lacks the capital base to provide the funding required to provide these loans. Often, dollar-denominated loans are all that is available, even if it's at a high rate of interest compared to US rates.
And where do these dollars come from?
Initially, they came from the US in the form of investments and trade. For example, when a US company purchases goods or services from an Australian company, the Australian company will deposit all or part of those dollars at a bank. Wherever that bank maybe, that dollar deposit sets off a chain of dollar creation that increases the supply of dollars.
Fractional Reserve Banking
The vast majority of baking systems work on a fractional reserve system, where banks are required only to hold a fraction of the money their customer deposit. That amount is called the reserve requirement and is usually set by the local central bank. Banks are free to invest the rest of the deposit, mostly in loans.
In a fractional reserve system, banks create money when they make a loan. Although in today's fiat currency world, the definition of money is open for debate, let's at least agree that they create currency, be it dollars, euros or yen, when they lend.
Most people think that only central banks can create money. That's true in part. Central banks are the only ones that can print bills and coins, but their real power comes from their ability to influence credit, albeit indirectly. Credit is the more critical variable because it's what pumps currency into the economy. Central banks influence credit by setting interest rates and reserve requirements, as well as other policy tools.
Central banks can also create ledger money, that is, money that only exists in digital form. Theoretically, there's no limit to how much money they can create, but the newly created money, by itself, does nothing. The central bank needs to put that money into circulation by placing it in the hands of economic actors. The most common way to do this is for the central bank to buy securities in the open market, which usually means buying US Treasury bills, notes or bonds. Since the Great Financial Crisis, however, this catalog has expanded to include mortgage-backed securities and, recently, corporate bonds.
When the central bank buys securities in the open market, the sellers of those securities, special dealer banks, receive reserves on deposit at the Fed in return. In other words, they don't receive cash they can freely spend but reserves that increase their capacity to lend.
If the banks decide to lend, that ledger money created by the Fed becomes actual currency, new money that can work its way through the economy.
When an individual or an organization takes on a new loan, new money is created. The debtor can do whatever it wants with that money: invest in securities, spend it on useless junk, or invest it in property, plant and equipment. Whatever the debtor decides to do, most of that cash will likely end up as a deposit at another bank sooner or later. This new deposit increases the reserves, and thus, the lending capacity of the receiving bank, which can, in turn, provide new loans, and the process repeats.
Through this mechanism, one single deposit can create many times more cash. This is known as the multiplier effect.
The money on deposit at all the banks, plus bills and coins in circulation, is called the monetary base, and central banks aim to influence it indirectly by buying or selling securities.
Why would the central bank want to do this?
To help stimulate economic activity during hard times, such as a recession, or to cool it down during a boom. Expanding credit increases demand, reducing credit trims demand.
Fractional Reserves at Work
Let's assume the reserve requirement is 10%. Let's also assume the Federal Reserve wants to inject more cash to kickstart the economy. It creates $100,000 out of thin air with a few clicks. It then goes to the open market and buys $100,000-worth of US Treasuries, for the sake of simplicity, from a single dealer bank.
That dealer bank sees its reserves increase by $100,000. Given the 10% reserve requirement, it must keep $10,000 in reserve, but it is free to lend $90,000. When the dealer bank makes a loan for that amount, it literally creates the money. Let's assume the debtor decides to take the cash and deposits it into his checking account at Bank A.
Banks A sees its reserve increase by $90,000 with the new deposit. Since the reserve requirement is 10%, it is only obligated to keep $9,000 to back-up the deposit and is free to lend $81,000 to a new customer.
Bank A then provides an $81,000 loan to a corporate client. What does Bank A do when the loan is approved and signed? It deposits the money at the borrower's account at Bank B.
Banks B sees its reserve increase with the new $81,000 deposit. Since the reserve requirement is 10%, it is only obligated to keep $8,100 to back-up the deposit and is free to lend $72,900 to a new customer.
Bank B decides to provide a $72,900 loan to another client to acquire a house. What does Bank B do when the loan is approved and signed? It deposits the money at the borrower's account at Bank C.
Banks C sees its reserve increase with the new $72,900 deposit. Since the reserve requirement is 10%, it is only obligated to keep $7,290 to back-up the deposit and is free to lend $65,610 to a new customer.
Bank C decides to provide a $65,610 loan to another corporate client. What does Bank C do when the loan is approved and signed? It deposits the money at the borrower's account at Bank D.
Theoretically, this process could go on forever because the amounts get smaller and smaller but never actually reach zero. In practice, the process does not go on forever, of course. The above is a gross simplification because there are many factors at play, but the chain stops when the amounts become negligible.
From a $100,000 increase in new "ledger money" created by the Fed and put into reserves through the purchase of securities, an operation otherwise known as Quantitative Easing, $309,510 in new money was "created" in loans. $90,000 loan from the dealer bank + $81,000 loan from Bank A + $72,900 loan from Bank B + 65,610 loan from Bank C. And that's just from four iterations.
There's a way to estimate the maximum impact a $100,000 expansion of the monetary base can have. Simply divide the amount of expansion by the reserve requirement rate: $100,000 / 10% = $1,000,000! Note, that's the maximum impact, but things aren't so simple in real life.
Notice that, once the central bank creates ledger money and puts it into reserves, it's the commercial banks that control credit expansion. Banks never react linearly to increases in reserves; never does an increase in deposits lead to a proportional increase in lending. That decision depends on each bank's reserve policy, risk appetite and even demand for loans.
Once the money enters the banking system, it's out of the central bank's control. It can only nudge banks to increase -- or decrease -- lending, but it can't order them to do so.
Fractional reserve banking is a fragile system. If all a bank's customers want their deposits back at the same time, it will not have the money on hand. This is called a run on the bank, and it can prove ruinous.
Runs on banks were much more common in the late 19th and early 20th centuries, and it's what deepened the Great Depression: as the stock market crashed and companies failed, people worried that the banks that had lent money to those same companies might fail, so they redeemed their deposits. Since the banks did not have the money, they failed. Since banks lend money to other banks, one bank failing can create a domino effect and provoke more bank failures. A loss of confidence in the banking system is what made an economic depression into the Great Depression.
Banks play a crucial role in the economy, the most important of which is providing loans, but they also bring other essential services such as taking deposits, keeping custody of assets and facilitating payments. Without these services, the economy grinds to a halt.
To avoid a repeat of the Great Depression, Congress created the Federal Deposit Insurance Corporation in 1933. Now, deposits are not only backed-up by each bank's reserves, but by the FDIC, which will make depositors whole, up to $250,000 per account, in case of a bank failure. Deposit insurance sounds great, but it creates a moral hazard in that banks now feel encouraged to take on more risk because Uncle Sam has them covered. And, in case you are wondering, the Federal Reserve set the reserve requirement to zero on March 26, 2020, to encourage banks to lend in response to the economic crisis. Yep. Zero.
The same multiplying mechanism from fractional reserve banking applies to eurocurrencies. A single dollar-deposit outside the US allows the receiving bank to lend a fraction of those dollars to another client. And on the chain goes, with little oversight or input from the Fed.
Drunk Dollars
So, where's the problem?
To a great extent, this system workes great, particularly in an expanding and globalizing economy. But the truth is that it's just one big experiment. There has never been another point in history where *all* money is fiat money. Policymakers are figuring things out as they go along. And the fractional reserve system amplifies everything.
The problem is that a considerable chunk of this complex and experimental system, the eurodollar market, is a giant Pandora's Box: once opened, it took on a life of its own; it morphed, grew and mutated over time, to the point where it is now massive and unpredictable.
Brent Johnson of Santiago Capital gave an excellent analogy (which I altered slightly): imagine a bunch of 18-year-olds in California. They can't drink because the minimum drinking age in the state is 21, so what do they do? They drive south of the border to Tijuana, Mexico, where the drinking age is 18. They buy booze and get drunk. They are still the same kids, except they are now drunk, yet they are not breaking any laws.
That, in a nutshell, is what the eurodollar is, drunk dollars. And like any drunk, it acts a little crazy. And like most drunks, it runs into trouble from time to time. Occasionally, it runs into serious trouble.
Fractional reserve banking works fine when credit is expanding. As long as there's a healthy demand for credit and that demand comes from good debtors, the banks will lend. But when the economy enters a recession and nudges the system into reverse, the entire mechanism works backward and subtracts credit from the marketplace.
When this happens in the US, such as the GFC in 2008, the Fed, the Department of the Treasury and other government agencies intervene to bring order to the banking system and keep the public's confidence. It doesn't matter if you agree with bank bailouts or not; the point is if the banking system is not functioning correctly, nothing else does, including supply chains.
In the eurodollar market, there are no adults nearby to tell the drunk dollars to stop boozing when they've had too much. When someone in the eurocurrency market runs into trouble, it can throw the whole system into reverse, sucking dollars out of these economies. When there aren't enough dollars in a particular country to satisfy demand, both for commerce and debt payment, local economic actors panic and begin buying dollars in the open market, devaluing their country's currency. Local central banks can provide some relief by using their dollar reserves, but history shows that no amount of reserves can stop a currency from repricing once panic sets it.
Who do these counties run to for help?
Well, the only country that can print dollars out of thin air: the US.
Of course, the Fed and the Treasury are under no obligation to provide liquidity during these periods of stress. The IMF can also intervene, but one could argue that the IMF is under US control, which gives the US an incredible amount of power.
No Good Benchmark
The eurocurrency market is tough to follow. Like physicists studying quarks: they can't observe them directly, but they can deduce their existence and behavior by observing their interaction with other particles. So it is with the eurocurrencies. There's no index to watch, no indicator to monitor and no one way to follow it.
For years, the London Interbank Offer Rate, or LIBOR, has been an imperfect proxy.
As the name implies, it is the rate at which London banks are willing to lend to each other for a given term in a given currency; the most important of which is the 3-month USD LIBOR. The vast majority of debt is priced off this benchmark, which — big surprise — can be easily manipulated by participating banks.
But stresses in the eurocurrency market don't always show in LIBOR. For that, you have to watch, for each country, the currency exchange rate, the central bank's reserves, interest rates and many other indicators for clues of dollar shortages.
Yet Another Paradox
Belgian-American economist Robert Triffin observed, since 1959, that having the world's reserve currency is not all good. Later dubbed Triffin's Paradox, he predicted that eventually, short-term domestic needs would conflict with external requirements.
Whichever country issues the world with the reserve currency must supply the rest of the world with that currency to fulfill world demand, which can lead to asymmetries in the balance of payments. In other words, the US would have to supply more and more dollars to the rest of the world to maintain liquidity, to the point where its gold reserves would no be sufficient to cover all the dollars in circulation. As this continued, other countries would question the dollar's convertibility into gold.
In other words, the US would not be able to maintain liquidity and confidence in the dollar simultaneously.
He was right because that's exactly what led to the Nixon Shock in 1971.
Of course, Triffin first described this dilemma when the dollar was still backed by gold. Regardless, this paradox still applies today. If the US continues to run a balance of payments deficit, specifically, a current account deficit, confidence in the dollar erodes abroad. To correct these imbalances, the US would have to reverse the current account deficit, sucking dollars from the rest of the word, creating a dollar shortage and likely sparking a crisis abroad.
These conflicting interests have happened before, the last time during the Great Financial Crisis, and are likely happening again today.
The current administration has prioritized reducing trade deficits with its trading partners and bringing investment and manufacturing back to the US. This means the US is now providing fewer and fewer dollars to the rest of the world, just as it needs them more and more.
Some may not care about what happens abroad, but that is a mistake. It does the US no good to have trading partners in disarray. And in today's world of complex and global supply chains, keeping the dollars flowing is also a matter of national interest.
So, what happens next?
Nobody Knows What's Next
The world is now hooked on credit, especially the US. Over the past two decades, credit expansion fueled economic growth, and any problems brought on by overleverage were solved with more debt. It's like handing a drink to someone who is already stupid drunk. It may make him happy in the short run, but it won't do him any good.
It's not that policymakers don't know what they are doing. They understand that any credit contraction would be painful for the real economy, not just markets and financial institutions. It would destroy wealth and jobs, and would likely have social and political implications. Troubled credit markets can destroy demand and supply. Policymakers prefer to kick the can down the road and have someone else deal with the fallout.
There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner, as the result of a voluntary abandonment of further credit expansion, or later, as a final and total catastrophe of the currency system involved.
— Ludwig von Mises
As author James Rickards said, “just because something is inevitable does not mean it's imminent”. Trouble is brewing in the eurocurrency markets, and there will be a reckoning sooner or later. Most people look at the stock market to get a sense of the mood of the economy. But if you want to get a real sense of what's coming, look at the eurocurrency markets.
Keeping a margin of safety has never been more critical. Run your finances, your investments and your business more conservatively. Keep some dry powder to take advantage of opportunities.
Fortunes will be destroyed and made in the coming years.