Dr. Steffen Murau| steffenmurau.com

Work in Progress

  • ‘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

  • ‘Covid-19 Debt and Macroeconomic Instabilities: What Role for the SDR System after the Pandemic?’ (with Fabian Pape and Tobias Pforr)

    The COVID-19 pandemic has led to drastic 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 $15 trillion by Q3 2020, hitting a new record of $272 trillion. While developed countries showed the largest absolute increase of an additional $7.1 trillion between Q3 2019 and Q3 2020, developing countries saw much larger increases in their debt/GDP ratios, with Thailand, Malaysia, and Korea showing increases of more than five percentage points in the same period (IIF, 2020). 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.

    The new wave of public indebtedness opens the question of how such instabilities should be managed on the international stage. One possible platform for such engagement could be the International Monetary Fund (IMF) which had originally been set up in order to manage the instabilities resulting from the fixed-rate exchange system under Bretton Woods. The IMF has recognized a possible role, stating that it “has responded to the coronavirus crisis with unprecedented speed and magnitude of financial assistance to help countries, notably to protect the most vulnerable and set the stage for economic recovery” (IMF, 2020). In this context, the Special Drawing Rights (SDR) system has been brought back into the spotlight. Policymakers discuss a new round of SDR allocation, the fourth in the history of the system founded in 1969, as a potential remedy to the debt crisis of emerging market economies and least developed countries.

    In this article, we adopt the perspective of critical macro-finance and present an analysis of the SDR system as a web of hierarchical interlocking balance sheets. We stress that the SDR system has an idiosyncratic accounting logic which makes SDRs unlike any other financial instrument. Adequate analysis requires to systematically distinguish between SDR as a unit of account, defined via a currency basket since 1974, and two types of SDR instruments—SDR allocations, which are non-tradable liabilities of central banks, and SDR holdings, which are tradable assets among central banks. SDR instruments are neither asset- nor credit-money but rather akin to US-Dollar overdraft facilities, with some similarities to Federal Reserve swap lines. On the basis of publicly available data, there remain gaps in the understanding of how and why states have actually used the SDR system over the last half century. While we see some narrowly circumscribed potential in a new SDR allocation to deal with liquidity problems in global USD markets, we caution against suggestions to use the system as a remedy against solvency problems that emerged due to the COVID-19 pandemic. A new SDR allocation is not like the issuance of helicopter money that would help states to repay their sovereign debt but rather like substituting treasuries’ US-Dollar debt with an opaquer form of central bank debt.

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


  • 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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