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The whole EU economy depends on the USD-EUR liquidity swap line between the two central banks. Basically EU has to do whatever US wants.
by xiphias2 4y ago
The whole EU economy depends on the USD-EUR liquidity swap line between the two central banks. Basically EU has to do whatever US wants.
- coob 4y agoHow?
- xiphias2 4y agoIt's quite nicely explained on the official EU site (much better than how I understand): https://www.ecb.europa.eu/mopo/implement/liquidity_lines/html/index.en.html https://www.ecb.europa.eu/mopo/implement/liquidity_lines/htm... Without a swap line banks couldn't just treat EUR as USD whenever an entity needs to keep USD for import/export purposes.
- monocasa 4y agoThat goes both ways. The US economy is dependent on having markets for consumer goods. Losing the EU as an easy market nukes the US economy as well.
- sofixa 4y agoYeah, one would think post-Brexit and post-pandemic and post-Russian invasion of Ukraine people would in general be more aware of interdependence in trade, finance, manufacturing, etc. but apparently not. (Yes, they did say that before WWI, and today it's a million times more intertwined)
- xiphias2 4y agoIt still matters game theoretically who loses more on not having a trade, and US having the reserve currency means that it has clearly more power over EU than the other way around.
- pkaye 4y agoSurprisingly the trade to GDP ratio is quite low for the US. And a good chunk of that trade is with Canada and Mexico. https://data.worldbank.org/indicator/NE.TRD.GNFS.ZS?most_recent_value_desc=false https://data.worldbank.org/indicator/NE.TRD.GNFS.ZS?most_rec...
- sofixa 4y agoYou should check out the GDPR and the Shrems judgements if you think that.
- RandomLensman 4y agoWhile without swaps between central banks there will (probably) be more issues in non-domestic funding markets, the whole EU economy isn't just depending on the swap line between the ECB and the Fed.