Odd Lots Josh Younger on the Surprising Origins of Eurodollars and Petrodollars
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Jun 19, 2023 In this discussion with Josh Younger, Senior Advisor at the Federal Reserve Bank of New York and former JPMorgan Chase expert, the origins of eurodollars and petrodollars take center stage. Younger unpacks how these dollar variants emerged post-World War II and their pivotal role in shaping global finance. He delves into regulatory challenges and the surprising connections between eurodollars and even a communist bank in Paris. The impact of geopolitical events, like the 1973 oil embargo, further illustrates how these concepts reshaped investment strategies and currency dynamics.
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Communist Origins of Eurodollars
- Post-WWII, Russians moved dollars to French banks like BSEN due to sanction fears.
- This was possibly used to pay striking French coal miners in 1948.
Eurodollar Arbitrage
- London's liberalization of FX forwards in 1951 created an arbitrage opportunity.
- Banks could accept dollar deposits, buy sterling assets, and hedge FX risk.
Early Mentions of Eurodollars
- The Economist first mentioned "foreign money" in London around 1954.
- This referred to dollar deposits in London banks, marking the growth of the Eurodollar market.