Brendan Greeley

They just created it.

The act of lending from a bank is the act of creating brand new dollars.

Okay, so we know that that happens domestically.

That's also happening internationally.

This is so hard to grasp if you assume that the dollar is sovereign, that it inherently comes from America.

But since the 1960s, banks all over the world have been marking up their own balance sheets with brand new dollar denominated deposits.

This is exactly the same thing as banks do in America.

The problem with sovereignty is they do this without any permission from the United States.

foreign banks create these offshore dollars, we sometimes also call them euro dollars, without any permission from the Fed, without any permission from the United States Treasury, certainly no permission, nobody asked me.

And they do this because it's useful for them.

These dollars are useful for these banks.

And so the Federal Reserve is actually chasing these dollars.

It's not pushing these dollars out into the world.

It's protecting these dollars, but it only realized that they were fragile, you know, over the course of the 80s and the 90s.

And what the Fed does is it offers swap lines.

Again, this sounds complicated.

It's pretty straightforward.

The Fed will, in an emergency, lend for a short period of time its own dollars to other central banks that it trusts.

Those central banks, in turn, can then provide those dollars, again, short-term loan, to their own commercial banks in case they're worried about the strength of their own balance sheets.

This happened in 2008 during the financial crisis.