Brendan Greeley

This is very important to point out, which is that in the United States, the dollar was basically a deposit in a bank.

Banks abroad, without any permission or regulation from the United States, were just making up their own dollars.

And this is something that the United States came to accept because it was really useful for the United States to have this global market in dollars.

Yes, almost.

So one of the things that's a challenge to talk about money is that we all have this assumption of what we call monetary sovereignty, that money comes directly from the state.

In your case, you're talking about the ECB, the European Central Bank.

In our case, we talk about the Federal Reserve.

One of the things that's very difficult to point out to people, because this isn't what we were taught, is that money comes from private banks.

In America, private banks produce all the dollars.

They produce brand new dollars when they make loans.

The Federal Reserve has a very important role in regulating that.

The same thing is happening within the eurozone.

When new banks in Ireland make loans, they're producing brand new euros from scratch.

Okay, so to your question, what was actually happening was that private banks in London were producing brand new dollars.

Very confusingly, we unfortunately call them euro dollars because of a historical accident.

They have absolutely nothing to do with the currency, the euro.

It's easier to think of them as offshore dollars.

So one strength of the dollar system

is that the Federal Reserve and the United States Treasury and the United States Congress and the White House have been very tolerant for the last 50 years of dollars created offshore.

Again, this is just private banks anywhere in the world offering a loan, denominating that loan in dollars and saying, look, there's a dollar.