The True Story of the 2008 Crash - Jeff Snider, Eurodollar University, DSPod #293

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This was a great conversation, good questions, very information. Thank you! I hope you can bring Jeff back to continue to convo.

I suppose one thing Jeff Snider and I can agree upon would be that we are not, nor should we, be going back to the gold standard. “The Great Transformation” by Karl Pollani goes into great depth in explaining that as well as what the hosts Anastasia and Shilo were reading at the time - “Debt: The First 5,000 Years” by David Graeber - which is an extremely important book because it outlines much of the history Jeff Snider seems to have forgotten in his historical analysis.

For instance; Jeff seems to have forgotten about the State altogether, never mind its ability to create money or it being the only conduit for “the people” to push towards democracy. In his telling of history it’s almost like banks came before the state, not the other way around.

We may have “bank notes” but that isn’t as important as what “country” (the state) that “note” is from. That’s especially true when you are talking about what “country” has the “global reserve currency,” which grants them huge power over the political and financial system as in the case with the U.S. after WW2.

It is hard to say that “banks control the world” but somehow “they have no idea how to run the global economic system,” while at the same time getting quite wealthy off of it, when it's far more plausible that states are in competition for greater political and economic control like how the United States is the global empire with clear geo-political goals; the most important being dominating global finance. Even Snider admits to the fact that after the 2008 crash banks were bailed out by the U.S. government. That’s a huge hole in his argument.

Sure, banks do a lot of shady dealings but the solution should not be more banks with less regulation. That is allowing for “unaccountable private tyrannies” to further consolidate their power by eroding whatever is left of what we call “democracy”.

I would ask anyone to read Michael Hudson’s “Superimperialism: The Economic Strategy of the American Empire” (third edition). It is incredibly important to understanding how the United States used it’s economic leverage after WW1, basically thrusting the world into WW2, to become the global empire it is today, using it’s financial institutions like the World Bank and the IMF, to prevent the majority of the global south from developing, forcing other countries to finance it’s wars, and as Hudson would say “Get a free lunch!”

So, what’s the Euro-dollar?

Hudson mentions it here:
Superimperialism
Chapter 13. Power Through Bankruptcy, 1968-1970
Defining Away the U.S. Balance-of-payments Deficit

“What was termed the International Financial Intermediary (IFI) Hypothesis asserted that the U.S. payments deficit was just a statistical illusion. The U.S. economy, it was argued, functioned much like a savings bank or savings and loan association. These institutions were called financial intermediaries because they took in short-term savings and reinvested them in long-term assets, mainly mortgages. Much like a savings bank, the United States borrowed, i.e., received short-term deposits from foreign dollar holders, and reinvested these funds long, e.g., in buying out European industrial companies. Foreign investors (including foreign central banks and governments) “chose” to lend their dollar balances to foreign branches of U.S. banks instead of exchanging them for local currencies. This was done partly in search for security against foreign currency devaluations, and partly because Europe’s credit markets were not as sophisticated (that is, debt-leveraged) as those in the United States. European stock markets likewise were not as open and active. Also, foreign central banks choose to invest their dollar surpluses in interest-bearing U.S. Treasury securities instead of gold, as the latter earned no interest. U.S. international banks turned around and lent their “Eurodollars” to U.S. international corporations to finance their foreign investment activities, including the buyout of foreign companies. The U.S. Treasuries used the resulting inflow of foreign funds to finance U.S. Government operations abroad …Foreign dollar holders either could turn these dollars over to their central banks in exchange for local currencies, or they could deposit or otherwise relend them directly to other U.S. borrowers via the Eurodollar market. As long as interest rates in the United States were higher than in foreign countries (partly as a result of the U.S. inflation), or as long the Federal Reserve’s Regulation Q blocked banks from borrowing via Certificates of Deposit from U.S. residents (and prohibited interest from being paid on checking accounts), banks found it in their interest to use their London or other foreign branches in the Eurodollar market to borrow back the dollars thrown off by the U.S. payments deficit by offering attractive interest rates to foreign holders, including foreign affiliates of U.S. firms. But when interest rates began to fall in the United States, and when Regulation Q was relaxed following the Penn-Central bankruptcy in May 1970, U.S. commercial banks stopped borrowing abroad, and focused their attention on attracting deposits at a lower cost from U.S. residents. Between June 1970 and June 1971 foreign Eurodollar deposits with U.S. banks, held mainly by foreign private-sector residents, fell by more than $10 billion. These dollars, the accumulated proceeds of U.S. payments deficits during the late 1960s, ended up in foreign central banks, which had little choice but to hold on to them instead of asking for U.S. gold. They were compelled to hold U.S. Treasury promissory notes, faute de mieux.” (pg’s 356 - 358)

Or we could simply go with Paul Gambles definition;

“When we talk about the market for US dollars outside the States they're generally referred to [as] Eurodollars. [It] doesn't matter whether they're in, you know, Saudi Arabia or whether they're in London, we tend to call them Eurodollars.”

( https://www.youtube.com/watch?v=ZSCHRjfI9Iw )


In either case, there doesn’t appear to be any mystery of what the Eurodollar is. It is the U.S. dollar [the Reserve Currency] in circulation outside the United States. Or more accurately; it’s the Imperial U.S. dollar in circulation outside U.S. borders. That’s pretty much it.

Lots of shitcoin peddlers letting their greed blind them instead of using the one that actually works.

anastasia is sooooo smart, i cant think of a better sex party with her online

This dude is conspiratorial as fuck. So even the correct things he says start to seem fishy. Because the amount of delusional bullshit is just too much

When is Jeff coming back? I love this! I’ve been watching the economy episodes in as much of a chronological order as I could, and I feel like I’m really starting to understand how the modern monetary system works! But it seems like it has to change now. So it would be nice to know what his idea is for what is coming in the future.

Quote; "MMT people are basically socialists [with a political agenda] in economics clothing" . Jeff is basically a crypto-currency libertarian [with a political agenda] in economics clothing.

You guys might enjoy Professor Perry Mehrling's free online Columbia university course on banking & monetary economics, which also delves into monetary history. Quite similar in style to Jeff, in terms of viewing money through ledgers and balance sheets. You can watch the entire semester's course free at Coursera!

Btw a fiat currency is not a made-up currency. Backing something with gold is pretty useless. Let's say we all traded in furs, and the wast majority of trades in fur was as an intermediary for other trade at what point does the value of fur become more or less decoupled from the value of fur as a commodity? Pretty damn fast, it is the same with gold, actually, it is a bit like revserve banking, if you get a run, there is no gold to back the value, it is as simple as that, gold then functions oretty independently as loney and as a comedity, except there is a point of devaluation where the actual gold doesn't drop off in value, and guess what happens if the money drops bellow the commodity pricing of gold, all the gold gets withdrawn and suddenly the currency can drop through the floor anyway and there is no more gold.

It's good to remember that the US, Canadian and EU governments have been (to a significant degree) captured by big banks and the ultra-wealthy elite. When it comes to central govt banking policies and regulations, those policies and regulations are, to a large degree, dictated by powerful banks and the ultra-wealthy to ensure high bank profits. This was and is true before, during and after the 2008 banking "crisis".

Great video and dialog. Very informative. Thanks. Near the end, you said that MMT people dodge some questions and issues. What questions and issues are they dodging or reluctant to answer clearly?

How we create money creates us.

If we create money FROM a promise to pay back more of it (interest rates) FOR (and only for) those activities that seem most certain to funnel the most money back to the source, then that is the engine of a certain kind of growth. Namely, the growth of the amount of things that are buyable products. That drives a certain kind of technological development. A type of progress.

It also codes money on money returns as the ultimate value in being of the system itself, which ultimately consumes even its own limited definition of progress because the premise of money on money returns as the most valuable thing is obviously false in a universe.

It's an engineering problem. What do we want the engine to do? What principles of physics (and ecosystemics, since we also stand on a planet in a universe) would allow the engine to do that different thing or many different things?

Since, in fact, existence is more valuable than money on money returns, and humans depend on a machine for existence that has its faulty premise about what's of ultimate value, we are constrained to enact that premise as our species' primary survival strategy.

We are the new Easter Islanders, with OUR wacky collection of stone heads, co-opted to play out a false premise that as a matter of course terminates anything contradicting it, before it self-terminates.

Change the premise of ultimate value and effects change. How we create money creates us.

What is of ultimate value in being? Apparently, a diversity of survival strategies that work together to maintain that diversity. What must we create money from? Any human activities that are 1). necessary for diverse survival and 2). enhance existence without undermining #1.

What would we spend money on? The produce of #2, pleasurable and beautiful things that aren't necessities of survival which nevertheless enhance our lives in accord with survival.

Since communities are the units of human existence, rather than lone individuals (there being no such animal), the diverse activities of individuals in a variety of communities at various scales is what we need to create money from.

Sovereign and genuinely decentralized money creation at the point of activity, paired with self-determined money deletion at the point of desired consumption.

Snider here is really excellent and considerably more versed in the technical aspects of monetary systems than i am. But there is a larger flip side to his statement: "the issue here is human. Not money. Not economics." It's like this. Because a monetary system is a context we exist within and depend on for our survival, that means it's a selective environment that conditions behaviour and human values. That begins with the way money is created.

If it's created from interest bearing debt for increase of economic commerce, society will value the growth of monetary return on investment. And we will all behave as if that is desirable, as well as feel the dissonance of that running against more primary human values.

If it's created from human activity for communally desirable goals, society will value the free individual for generating collective return on communal investment.

The other part has to do with money that circulates rather than flows and deletes continually, because (i think) circulation is always capturable. How do we create it? How do we use it? Do other people need your money, or do they need your excellent activity? That's your selective environment.

Jeff again pretends that he is not talking MMT yet explains it correctly when detailing it yet makes fun of how is that called. So basically he just does not understand terminology bu understands detail workings of MMT. Jeff also is doing a sale pitch of crypto which is no different then stocks that he correctly describes.

Can't wait till you guys get into how the militaries control the economy

This series is the essence of DemystifySci.

Calling the status quo to task and shattering ingrained paradigms / rules of the “system”.

Thank you, Shilo & Anastasia.

Warren moseler should not be compared with the rest of the mmt people. The fault with all the American commentators is the arrogance. They feel like they are surrounded by people who are too dumb to see how simple the solution is. Steve keen denounced Richard Werner, Jeff Snider pretended that Richard was not talking about this a decade before Jeff was. Jeff mentioned that money creation for a medium size business to invest could initiate positive feedback loops. Which crypto currency has money creation allowed for productive purposes? Does ripple? Until you divide the economy into productive and parasitic, like saint Simon, you won't find clear signals in the historic data. Wealth and money are confused purposefully to divert people's attention away from the truth of parasitism. It would be nice to ask Jeff about 2019 Jackson hole blackrock paper about the central bank going direct to cause inflation, and the subsequent actions taken in 2020, then he will hopefully acknowledge that the central banks can have a demonstrable effect aside from changing regulations. You could go to the Fred website and look at other "assets: securities held outright" on the feds balance sheet. Ask about the impact and the 6% interest income paid to the central bank stockholders from interest payments that are not returned to the Treasury.(101, 40 Stat. 1314 chapter 3 federal reserve system)

20:36—This is a really profound insight, and I think it probably extends beyond surface level mistrust; it is projection writ large. Where institutions themselves were so corrupted to the core via decades of neoliberal deregulation policies—they then projected this onto all the market players. And the entire system went into meltdown. It's like a market wide application of the adage: there is no honor amongst thieves.

Awesome information thanks Jeff Snider