From Bazooka to Backstop The Emergence of a Permanent International Lender of Last Resort
My dissertation at LSE was titled “From Bazooka to Backstop: The Emergence of a Permanent International Lender of Last Resort”. In it, I explain how it came to be that in 2013 six major central banks decided to implement what some now call the C6 liquidity swap line network. Arguably, this is a permanent International Lender of Last Resort. I draw on arguments by Claude Lévi-Strauss to argue that central bankers design institutions by bricolage. They craft international institutions not so much in a rationalist, forward looking way but rather creatively re-deploy existing means.
You can find an outline of the dissertation below. The text itself and a link to a presentation on the topic are linked below that.
Permanent domestic discount window lending has been established since at least the 20th century as a core feature the central bank provides. We have also historically witnessed numerous cases of temporary international lending of last resort (ILOLR) between sovereign central banks. A permanent backstop to international Eurodollar markets has long been debated and sought for but remained technically impossible (Fischer 1999). The emergence of a permanent ILOLR in the shape of the C6 liquidity swap lines therefore begs explanation. The six major central banks since 2013 uphold this new institution of monetary cooperation through which they provide liquidity to each other at unlimited amounts. My work draws on work by the anthropologist Lévi-Strauss (1966) and understands the emergence of this international backstop as a ‘design by bricolage’. Therefore, central bankers followed a (1) dialectical process of agency and structure and (2) creatively re-deployed tools that existed previously. The C6 network therefore is no perfect solution and prone to instability. The presented work thus expands on ‘infrastructural entanglement’ (Braun 2018) of central banks in financial markets and makes the precise practices (Schatzki, Knorr-Cetina, and von Savigny 2001) visible that constrain and enable central bankers’ decision making.