Tom Bilyeu

Can't the Fed just fix this?

Nope.

The Fed can only create domestic reserves.

It controls the money supply inside the United States, but Eurodollars exist outside of its jurisdiction.

The Fed has no direct lever to pull.

It can set up dollar swap lines with foreign central banks, essentially lending reserves to the ECB or the Bank of Japan, who then filter those dollars out to their local banks.

But those programs are indirect, they're slow to activate, and they're politically constrained.

They also have a whole bunch of limits.

The real backstop of the Eurodollar system is not the Fed.

It's just confidence and nothing more.

As long as people believe it, it works.

If they stop believing it, it freezes.

Banks keep rolling credit because they trust their counterparties.

They trust that the firms they're lending to will be able to pay them back.

They trust the system will keep functioning.

The moment that trust starts to crack even slightly, the rational move for every individual bank is to pull back.

Not because they know someone is going to fail, but because they can't afford to find out the hard way.

This is why it all rhymes with 2008.

Because that's exactly what happened in 2008.

And that's the exact situation we're heading into once again right now.