Dr. Steffen Murau| steffenmurau.com

Work in Progress

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

    The Eurocrisis dispelled the “neoliberal” Eurozone governance approach that the “efficient” crowd intelligence of private financial institutions would “discipline” the balance sheets of national sovereigns. Instead, during the Eurocrisis, the private balance sheets of Eurozone financial institutions contracted sharply and had to be bailed out by European treasuries. Rather than disciplining public balance sheets, private balance sheets forced the treasuries of the most crisis-ridden countries to massively expand and take on new debts for the bailouts. Even though these events should have sensitised European policymakers to the evolving complex role of public balance sheets for Eurozone governance, the official reforms—first and foremost the Fiscal Compact—reinforced the orientation towards market discipline.

    While these developments have been well-noted, what has been less explored is the proliferation of alternative channels for governance in the Eurozone. Indeed, we argue that the Eurocrisis has triggered a process of strengthening a distinct governance logic that emphasizes “off-balance-sheet fiscal agencies”. Our paper traces the evolution of this mechanism of “governing through off-balance-sheet fiscal agencies” by looking at four off-balance-sheet agencies that acquired fiscal responsibilities: first, the European Investment Bank which predates the Eurozone; second, the European Stability Mechanism, which emerged during the Eurocrisis and may be transformed into a European Monetary Fund; third, the Single Resolution Fund, which comes close to a European deposit insurance scheme for systemically relevant banks; and fourth, the European Commission’s plans for a special purpose vehicle to securitize national sovereign bonds and issue “European Safe Bonds”.

    Presentations at EuroMemo online conference (09/2020)

    Andrei Guter-Sandu, London School of Economics

  • 2020 | ‘The Hierarchy of the Offshore US-Dollar System. On Swap Lines, Foreign Repo Facilities and Special Drawing Rights’ (with Fabian Pape and Tobias Pforr)

    The international monetary system is a US-centered global payments system, organized around the US-Dollar (USD) as ‘key currency’. One of the system’s essential features is that private institutions autonomously create USD-denominated private credit money offshore. To maintain par between onshore and offshore USD deposits in a crisis, the system is heavily dependent on emergency USD liquidity provision, in particular by the Federal Reserve, the hierarchically highest balance sheet. Yet as a domestic institution, the Fed does not lend directly to private institutions outside the US.

    This paper conceptualizes international monetary hierarchy as the result of three mechanisms that shape access to offshore emergency USD liquidity provision for non-US central banks. The first-layer periphery receives emergency USD from the Fed through central bank swap lines. The second-layer periphery receives USD from the Fed through the new FIMA repo facility by pledging US treasuries as collateral. The third-layer periphery can access emergency USD only through the Special Drawing Rights (SDR) system, which is intermediated by the International Monetary Fund (IMF) and essentially distributes USD FX reserves of first and second-layer central banks to the third layer.

    The paper details the mechanics of those three mechanisms and integrates them in a macro-financial model of the Offshore US-Dollar System. The analysis advances our understanding of how international hierarchy is constructed in the Offshore USD System. It chimes in with existing analyses of the Global Financial Safety Net and explains how the IMF and SDRs are integrated in the Offshore US- Dollar System.

    Presented at EAEPE online conference (09/2020)

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


  • ‘Quantitative Easing, Central Bank Independence and the Seeming Fundamental Difference between Monetary and Fiscal Policy’ (with Tobias Pforr)

    Quantitative Easing (QE) has become the main new central banking activity after the 2007-9 Financial Crisis. Conventionally referred to as an ‘unconventional monetary policy’, the Federal Reserve has recently called it the ‘new normal’ of central banking. At the same time, QE sparks fear and anxieties in others, especially as it is said to endanger central bank independence and blur the boundaries of monetary of fiscal policy with inflationary effects. This paper investigates this criticism. By adopting insights from International Political Economy, the Money View and Social Studies of Finance, we advance two separate, yet connected arguments. First, we argue that both expansionary monetary policy and debt-financed expansionary fiscal policy originate in one generalized balance sheet operation, a swap of IOUs between the central bank and the treasury, and are hence two sides of the same coin. From that perspective, QE represents a prototypical form of credit money creation and is not at all as unconventional as the current discourse suggests. Second, we highlight that the concept of central bank independence imagines the process of money creation to be fully apolitical. However, we argue that the institutional setup for money creation is always and everywhere political because it relies on social infrastructures that organize creditor-debtor relations. Historically, however, there have always been strategies to depoliticize money creation, the latest one being the dogma of central bank independence. By reconnecting monetary and fiscal policy, QE in itself does not politicize money creation but puts a crack in the existing de-politicization strategy.

    Presentations at EAEPE conference, Nice (09/2018), Oxford Political Economy of Finance Conference (10/2018), City Political Economy Research Center seminar (11/2018), Intersections of Finance and Societies conference, Edinburgh (12/2018), Annual Convention of the International Studies Association, Honolulu (03/2020)

    Tobias Pforr, University of Reading

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

    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)

    Jens van ‘t Klooster, European University Institute