11 lessons
The FX Market: No Exchange, Just a 24-Hour Dealer Network
The biggest market on earth trades $7.5 trillion a day, yet has no building, no opening bell and no central exchange. So where does a EUR/USD price actually come from?
CLS and FX Settlement Risk: Solving Herstatt
In 1974 a small German bank took everyone's Deutsche Marks, then went bust before paying out the dollars it owed. That five-hour time-zone gap is why CLS now settles over USD 7 trillion a day so that neither leg moves unless both do.
The Repo Market: Wall Street’s Overnight Loan Machine
Every night, banks and funds borrow trillions of dollars for a single day, secured against government bonds. When this plumbing clogs, like it did in September 2019, the entire financial system feels it.
The Yield Curve as a Machine: How 8 Fed Words Reprice Every Bond on Earth
The Fed only sets one rate, for one night, for US banks. Yet a single sentence from its chair can shave billions off German pension funds and Japanese mortgages within seconds. Here is the gearing that makes that possible.
How a Rate Decision Actually Hits the Economy
A committee votes to raise rates by 0.25%. But the central bank cannot force a single mortgage or savings account to change. So how does that one number reach your wallet within days?
QE Mechanics: the Fed Doesn't "Print", Watch the Balance Sheets
Everyone says the central bank "fires up the printing press". It never touches a banknote. What really happens is two electronic entries on its own ledger, and an asset swap that leaves the public no cash at all.
Eurodollars: the Offshore Dollar System Nobody Legislated
There are trillions of US dollars on deposit that the Federal Reserve never printed, cannot directly see, and does not insure. They live in banks outside America, and they quietly run the global financial system.
LIBOR to SOFR: Replacing the Number Inside $300 Trillion of Contracts
A single rate, set each morning by a handful of bankers answering a survey, was wired into roughly $300 trillion of loans and derivatives. Then it was caught being rigged, and the world had to swap it out without breaking the contracts.
Currency Pegs and Their Collapse: The 1992 Bank of England Mechanics
On 16 September 1992 the Bank of England raised interest rates twice in one day and burned through billions defending the pound. By 7pm it surrendered, and one trader walked away about $1bn richer.
Money Creation vs Inflation: From Balance Sheet to Prices
A bank does not lend out your savings. It types a number into a new account, and money exists that did not a second ago. So why does that not instantly double prices?
Treasury Auctions: How a Government Borrows $100B Before Lunch
At 1:00 p.m. on a Wednesday the US Treasury sells more debt than most countries owe, in a single auction that closes in seconds. Everyone who wins pays the exact same price, even the bidder who would have paid more.