Steve Bain

The Eurodollar Market: Jeff Snider’s Theory Meets Austrian Reality

November 10th, 2025

For a form of money that technically doesn’t exist, the Eurodollar has done remarkably well for itself. Created in the grey zones of mid-century finance, this offshore dollar system grew into the invisible scaffolding of global trade and investment. It is the world’s shadow currency, the bloodstream of globalization and, if you believe Jeff Snider of Alhambra Investments, the source of our collective malaise.

Snider is one of the few analysts to treat the Eurodollar Market as the real monetary system rather than a side alley of high finance. His claim is dramatic; that the world has been running on a broken money engine since 2007, and everything from sluggish growth to recurrent crises flows from that failure. In his view, the problem is not an excess of credit but a shortage, a chronic dollar drought choking global liquidity.

It is a seductive idea; elegant, technical, and rebellious toward mainstream central-bank dogma. Yet it may have the causality backwards. The deflationary stagnation Snider sees as a monetary shortage might instead be the exhaustion of a decades-long credit binge.

The rise of ghost money

The Eurodollar Market was born in the 1950s, when Soviet and European banks began holding dollar deposits in London to avoid American regulations. Those dollars were not printed by the Federal Reserve; they existed only as balance-sheet entries – “ledger money,” as Snider calls it. By the 1980s this offshore dollar system had become the backbone of global finance, funding everything from oil trade to mortgage securities.

It was a brilliantly elastic invention. With no gold constraint and no national jurisdiction, banks could conjure dollar liabilities almost at will. The system’s reach extended far beyond the United States: a banker in Singapore could create a dollar loan to a shipper in Brazil using deposits held in London. For decades it seemed to work flawlessly.

Snider calls it the most successful reserve currency system ever devised – a decentralized engine of global liquidity that made post-war prosperity possible. Then, in 2007, the machinery seized up.

When the plumbing failed

The Global Financial Crisis was, in Snider’s telling, not merely a housing bust but the moment the Eurodollar engine blew a gasket. The collapse of mortgage-backed securities destroyed the collateral base upon which the system depended. Confidence evaporated; interbank lending froze. Private balance sheets, once fountains of synthetic dollars, became clogged with fear.

Central banks mistook the problem for one of liquidity rather than structure. Quantitative easing (QE) “flooded the system with reserves,” Snider says, but those reserves were inert and sloshing uselessly inside regulated banks while the offshore plumbing remained blocked. The world, he argues, has been starved of dollar liquidity ever since.

Each subsequent crisis fits neatly into his template. The 2011 euro-zone panic, the 2014-15 emerging-market rout, the 2019 repo spike, and the 2020 COVID meltdown all appear, through Snider’s lens, as echoes of the same broken mechanism. In each case, funding markets seized, collateral disappeared, and policymakers scrambled to reopen dollar swap lines. Snider sees a pattern of recurring “monetary tightening that has nothing to do with central banks” or monetary policy.

He may be right about the symptoms. The question is whether his diagnosis explains them.

The view from Vienna

To an Austrian economist, Snider’s analysis is fascinating but upside-down. The world’s problem since 1971 has not been too little money but too much credit – credit conjured without discipline once the dollar was severed from gold.

When Richard Nixon closed the gold window, he liberated money creation from any physical anchor. The Eurodollar system, already swelling offshore, became the perfect conduit for expansion. Free from reserve requirements or convertibility, global banks could multiply dollar claims endlessly.

The result was a super-cycle of leverage. Global debt, around 100% of world GDP in 1970, surpassed 200% by the turn of the century and now hovers above 350%. Each crisis i.e., Latin America in the 1980s, Asia in the late 1990s, dot-coms in 2000, subprime in 2008, and the pandemic in 2020, was met with still looser money and still larger balance sheets. This is not what scarcity looks like.

Snider sees deflation as a symptom of malfunction. An Austrian would call it the inevitable hangover after an artificial boom. The “dollar shortage” is not a sign that the world needs more liquidity; it is the market’s belated attempt to liquidate malinvestment.

The illusion of infinite collateral

Snider’s framework rests heavily on collateral (particularly U.S. Treasuries) as the lifeblood of the Eurodollar Market. In his telling, the shortage of good collateral constrains credit creation, much as gold once did. But here lies a paradox.

Every new unit of credit demands collateral, which is itself financed by more debt. The system grows in a circle: leverage begets collateral, which begets more leverage. The illusion of infinite Treasury demand sustains it. However, foreign central banks, once eager buyers, have been quietly diversifying away from U.S. paper.

The BRICS nations hoard gold; others seek to settle trade in local currencies. Meanwhile, America’s deficits keep swelling. The notion of a permanent, yield-insensitive bid for Treasuries looks increasingly fanciful.

If the Eurodollar system is struggling to expand, it may be because it has reached its own limits, not because it is being starved, but because it is bloated.

The disinflation that wasn’t monetary

Snider’s theory also credits the persistence of low inflation after 2008 to the broken money machine. But the 2010s were disinflationary for reasons that had little to do with monetary plumbing. Demographics in the West were still favorable; globalization exported cheap labor from Asia; technology squeezed costs. Those secular forces masked the inflationary consequences of easy credit.

When they reversed; with aging populations, fractured supply chains, and fiscal blowouts, inflation returned swiftly, despite Snider’s supposed ongoing “dollar shortage.” The problem was not a lack of liquidity but the belated reckoning of policies that assumed it could be infinite.

QE and the art of postponement

Snider is right that QE did not fix the Eurodollar Market. What it did was buy time. By swapping Treasuries for reserves, central banks prevented mass liquidation of private debt. Without QE, 2008 might have produced a true deflationary depression. But the price of that rescue was moral hazard, another decade of cheap credit, inflated assets, and false calm.

From an Austrian perspective, QE was the latest in a long line of interventions that preserved the structure of unsound finance while deepening its fragility. Each bailout created the conditions for the next.

A black hole of our own making

Snider likes to describe the Eurodollar system as a black hole – invisible but exerting immense gravitational pull. It is a brilliant metaphor. What he may not realize is how well it captures the Austrian view of fiat money itself: an ever-expanding void that swallows real savings and emits only the glow of paper wealth.

The Eurodollar Market, once celebrated for lubricating global commerce, has become the sinkhole of modern capitalism. It’s a network of claims upon claims, dependent on confidence that cannot be printed. When that confidence falters, dollars appear to vanish. But what disappears is not real money; it is leverage.

No way out but through

Snider often argues that nothing can replace the Eurodollar system; not crypto, not the yuan, not a BRICS alternative. On that point, he is probably right. The world is addicted to offshore dollars because they remain the deepest, most liquid, and most trusted form of credit money available. That dominance, however, is precisely the problem.

As long as global finance depends on this shadow system, every downturn will threaten seizure and every rescue will inflate the next bubble. Policymakers will misdiagnose each crisis as a liquidity problem when it is really one of solvency.

The uncomfortable truth is that the Eurodollar’s irreplacability makes its eventual reckoning systemic. The machine cannot shrink without pain, yet it cannot expand indefinitely either.

Back to the foundation

Snider’s achievement is considerable. He has mapped the uncharted plumbing of the global dollar system with a level of detail few central bankers can match. He is right that the Eurodollar Market operates largely beyond the Federal Reserve’s control, and that its malfunctions ripple through trade, commodities, and capital flows.

But his conclusion, that the world suffers from a persistent monetary shortage, mistakes a self-inflicted excess for deprivation. The Eurodollar system was not a victim of 2007; it was the culprit. Its apparent efficiency before the crash was a mirage of easy leverage.

What broke in 2008 was not a perfect machine but a perpetual-motion fantasy, a belief that money could expand without anchor and credit could compound without limit. Since 1971, that belief has underwritten the global economy. The Eurodollar merely gave it plumbing.

The long unwinding

For now, the system limps on: patched by QE, propped up by fiscal gimmicks, and misunderstood by many of those who manage it. Each time the world hits another dollar squeeze, the same ritual unfolds i.e., panic, intervention, relief. The black hole expands.

Snider foresees an endless deflationary drag; the world trapped in monetary malfunction. But politics has a different gravity. No government willingly tolerates mass defaults or falling prices when the printing press offers an escape. The more debts mount, the stronger the temptation to inflate them away.

The likeliest endgame, then, is not permanent scarcity but excess beyond restraint – a cascade of money creation disguised as rescue. What begins as “liquidity support” becomes fiscal subsidy, then outright debt-monetization, where the Fed prints new dollars to buy up the U.S. debt instruments (bonds in particular) that the market no longer wants. Inflation, once dismissed as impossible, reappears as policy.

Whether the process unfolds slowly or ends in a more spectacular collapse is unknowable. But the direction of travel is clear. The Eurodollar Market, once the invisible engine of prosperity, now anchors a system that can survive only by monetary debasement.

The world is not condemned to deflation. It is addicted to inflation.

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