The Top 10 Things We Learned on Odd Lots in 2023

Joe Weisenthal (0:10)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

Tracy Alloway (0:14)

And I'm Tracy Alloway.

Joe Weisenthal (0:16)

Tracy, obviously one of the best things of doing Odd Lots is just all the random fun things that we learn. I mean, that, you know, that we learn over the course of the year, or that we learn in any given episode.

Tracy Alloway (0:27)

Yeah, I don't know of many other jobs where you can just kind of look into anything that you think might be interesting, but this is one of them. And on Odd Lots, I suppose we do have a reputation nowadays for covering a wide variety of topics. So things that are going on right now, things that may have happened in the past. And it means that we learn a lot about a wide variety of subjects.

Joe Weisenthal (0:52)

And some of them, of course, are, you know, we learn about them in the, you know, what we learned is interesting, but also sort of straightforward. So for example, you know, I'm not surprised that an increase in steel costs, although that's interesting, makes it harder to build offshore wind, but I was surprised to learn, for example, that the Jones Act, perpetual odd lots topic, was also an impediment, also interesting, also very surprising in a way I was definitely not anticipating.

Tracy Alloway (1:20)

Yes, it all comes back to the Jones Act. This is sort of a classic odd lots thing where we discover one aspect of the world or the economy, and then we keep discovering it in other conversations. It keeps coming up, but it is the end of the year, and we are both in a reflective mood. And so we've gone over all the conversations that we had in 2023, and we've picked out our top 10 most interesting and most surprising things that we have learned this year.

Joe Weisenthal (1:49)

Yep, so let's kick it straight off with an episode with Josh Younger on the origin of Eurodollars.

Josh Younger (1:56)

So the first, the definition of Eurodollars being deployed offshore is fairly specific, and the question is, when did that start?

And we don't really know. We know roughly in the late 40s, it's a declassified CIA documents. After the war ended, the Russians were moving money around because they were worried about a subsequent land war in Europe and they didn't want their funds to be frozen. Nevermind the weirdness of like a Soviet invasion where they need dollars. I'm not sure why that would be necessary, but they were uncomfortable leaving money in New York. And so there were a handful-

Tracy Alloway (2:25)

The title of this episode should be the Communist Origins of Eurodollars.

Josh Younger (2:29)

Yeah, and so they were worried about sanctions, which connects somewhat to today. And they moved their money from New York banks to a handful of banks, to specifically in France, London and Belgium, because the local regulations allowed those banks to issue non-local currency deposits. Your local regulator has to allow this in the first instance. And in Paris in particular, there was a bank called basically the Commercial Bank of Northern Europe. I'm not gonna try to pronounce it in French, but it was called BSEN. BSEN was run by a notorious communist sympathizer who had relationships in Moscow.

And so they were comfortable with that particular bank, and they grew its assets from $7 million to $200 million over a few years.

The first recorded use of those Eurodollars was possibly, although it's hard to say, replacing the salaries of striking French coal miners in 1948 So there's some evidence of that. But that's not really a Eurodollar in the definition that I just described, because it doesn't really have a use, because I didn't say anything about the asset side of the equation.

Tracy Alloway (3:28)

So where did the asset side come from? This is just going to be one of those episodes where we ask you, like, how did this happen?

And then what?

Josh Younger (3:36)

So it was tied basically to trade, because trade was denominated in dollars. But when it's all communist dollars, it has to be East-West trade. So trade crossing the Iron Curtain, which was small because both the Russians and the Americans were not terribly comfortable with a large volume of trade. And the Russians in particular had a policy of self-reliance. So they said, we don't want to need imports from the West to run our economy or our society.

We don't know how big that was. It was actually, as of 1947, illegal to talk about economic data in the Soviet Union. There was a law passed that said, this is punishable by some extreme measure.