Dr. Steffen Murau| steffenmurau.com

Work in Progress

  • ‘Covid-19 and Macrofinancial Debt Crises. What Role for the Special Drawing Rights System?’ (with Fabian Pape and Tobias Pforr)

    The Covid-19 pandemic has led to dramatic increases in government borrowing. The Institute of International Finance (IIF) has gone so far as to speak of an “attack of a debt tsunami”, as global debt increased by over USD 15 trillion by Q3 2020, hitting a new record of USD 272 trillion. Even though government borrowing rates have so far remained at historic lows for many countries, such developments are also a recipe for possible macroeconomic instabilities over the longer term. This opens the question of how such instabilities should be managed on the international stage and what role the IMF and its Special Drawing Rights (SDR) system can play in managing future macroeconomic stability.

    In this article, we adopt the perspective of critical macro-finance and present an analysis of the real-world SDR system as a web of hierarchical interlocking balance sheets. The SDR system is a small payment community that comprises one institution of each IMF member state, called ‘participant’ (typically the central bank), the IMF General Department as well as prescribed holders, such as development banks and intergovernmental monetary institutions. We stress that the SDR system has an idiosyncratic accounting logic—the result of a French-American compromise made in the 1960s—which makes SDRs unlike any other financial instrument. The term SDR is effectively used to refer to three things: a unit of account (today defined as a currency basket), a non- tradeable liability of the participants (called SDR allocation), and an asset (called SDR holding) that is tradable within the SDR system. After the demise of the Bretton Woods System, the SDR system was long seen as a ‘solution in search of a problem’, with an unclear practical purpose.

    Based on the analysis of original IMF data, we argue that the SDR system today has three different functions: First, it acts as a de-facto credit line for participants to borrow usable currency, predominantly USD, from other participants which can be obtained by selling SDR holdings. Second, it allows the IMF member states to pay contributions to the IMF General Department and to other prescribed holders. Third, it allows for those prescribed holders to ask for contributions in usable currency from IMF member states. Based on this analysis, we see the SDR system in its present form as serving a very minor and narrow role in the international monetary architecture. Given its accounting structure and functions, we caution against suggestions that this system can be used as a ready-made remedy against potential large scale solvency problems that may finally break out in the aftermath of the COVID-19 pandemic.

    Fabian Pape, University of Warwick
    Tobias Pforr, University of Reading


  • ‘Transformation of the Eurozone Architecture. On Crises and Institutional Change in the Offshore US-Dollar System’

    This study adopts a dynamic perspective on the transformation of the Eurozone architecture, using the macro-financial model developed in Murau (2020) as conceptual framework. It analyzes changes in the web of hierarchical interlocking balance sheets in four transition phases: the preparatory stages leading up to 1999 when the Eurozone 1.0 became effective; the 2009-12 Eurocrisis; the post-crisis reform in the Eurozone 2.0; and the transition towards a Eurozone 3.0 starting with the Covid-19 crisis in March 2020.

    Within the logic of the macro-financial model, the study describes the changes that have taken place in the Eurozone during each of the transition periods. This refers to institutions, instruments and elasticity space in all four segments of the monetary architecture—central banking, commercial banking, non-bank financial institutions, as well as the fiscal ecosystem. This descriptive aspect of the transformation is expressed via changes in the structure of interlocking balance sheets. On that basis, the study will ask what the causal forces were that induced those changes. For each of the transition
    phases, the study depicts four possible agents of change: (a) policymakers as agents of the state with a clearly delineable democratic legitimation; (b) technocratic actors; (c) representative of corporate interest; or (d) endogenous dynamics within the credit money system.

     The key intellectual interest of this study lies in the question to which extent the modern credit money system on its own is causing the transformation of itself. Murau (2017) has argued that there is an endogenous tendency of credit money systems to transform due to the possibility of creating money out of nothing. The framework of hierarchical interlocking balance sheets, which this macro-financial model provides, allows to further spell out this idea.

    Presentation at Workshop “Beyond ‘normal’ central banking: New risks and the political economy of monetary and fiscal policy coordination”, Ghent University, 19-20 May 2021.

  • ‘The Transformation of Eurozone Fiscal Governance. Mitigating Fiscal Discipline through a Proliferation of Off-Balance-Sheet Fiscal Agencies’ (with Andrei Guter-Sandu)

    The original Maastricht regime designed the Eurozone’s fiscal segment in a way that sought to keep member states’ treasury budgets balanced by disciplining them through market forces, reducing the overall volume of public indebtedness, prohibiting monetary financing, and avoiding that Eurozone treasuries bail out each other. In this article, we analyse how this ‘neoliberal model of Eurozone fiscal governance’ has been gradually superseded by an alternative approach that we call ‘governing through off-balance-sheet fiscal agencies’ (OBFAs). OBFAs are special purpose vehicles that complement treasuries in supporting public investment, offering solvency insurance for banks, providing capital insurance of last resort for other treasuries, and expanding the stock of safe assets. By sponsoring OBFAs, treasuries can substitute ‘actual’ liabilities on their balance sheets, which are potentially in conflict with neoliberal EU rules, with ‘contingent’ liabilities—guarantees that do not appear on-balance-sheet. Together, national and supra-national treasuries and OBFAs form a ‘fiscal ecosystem’ in which those neoliberal rules get perpetuated and re-emphasized on a declaratory level but in practice are increasingly mitigated. This new model of Eurozone fiscal governance is reflected not only in multiple policies implemented since 2010 but also represents the main strategy in many current Eurozone reform proposals.

    Presentations at EuroMemo online conference (09/2020) and the research seminar of the Department of International Politics at City, University of London (10/2020)

    Andrei Guter-Sandu, London School of Economics

  • 2020 | ‘Rethinking Monetary Sovereignty. The Global Credit Money System and the State’ (with Jens van ‘t Klooster), SocArxiV

    This article proposes a conception of monetary sovereignty that recognizes the reality of today’s global credit money system. Monetary sovereignty is typically used in a ‘Westphalian’ sense that simply denotes the ability of states to issue and regulate their own currency. This article rejects the Westphalian conception. Instead, it proposes a conception of effective monetary sovereignty that focuses on what states are actually able to do in the era of financial globalization. It fits the hybridity of the modern credit money system by acknowledging the crucial role not only of central bank money but also of money issued by regulated banks and unregulated shadow banks. These institutions often operate ‘offshore’, outside a state’s legal jurisdiction. Monetary sovereignty consists in the ability of states to effectively govern these different segments of the monetary system and thereby achieve their economic policy objectives.

    Presentation at the International Studies Association’s annual convention, Toronto (03/2019) and the and at the Prospects of Money workshop at Hamburger Institut für Sozialforschung (01/2020)

    Jens van ‘t Klooster, European University Institute

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