What are Eurodollars?

European dollar, it is not a special kind of US dollar, it is homogeneous with the domestic circulating US dollar, and has the same liquidity and purchasing power. The difference is that the European dollar is not regulated by the financial institutions in the United States and is not subject to the relevant banks of the Federal Reserve Constraints on regulations and interest rate structure. It deposits US dollar deposits in banks outside the United States, mainly European and European branches of US banks, or US dollar loans borrowed from these banks. The European dollar and the US dollar circulating in the United States are the same currency and have the same value. The only difference lies in the different financial treatment.

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After the Second World War, a large amount of US dollar deposits flowed to Europe due to the Marshall Plan of the United States to assist Europe and the United States became the largest export market of the rebuilt Europe. As a result, a large amount of USD deposits are deposited in banks outside the United States. At the same time, some countries, including the Soviet Union, also deposited part of their US dollar deposits in banks in the United States.

During the Cold War, especially after the Soviet invasion of Hungary in 1956, the Soviet government feared that the United States would freeze his dollar deposits in North American banks. At this point a British bank told the Soviet government that they could receive their US dollar deposits outside the United States, and then they would deposit them in American banks. In this way, it is impossible for the United States to freeze its account, because the deposit at this time belongs to the British bank and not to the account under the Soviet government. This operation is considered the first use of the term "Eurodollar".

Since then, the "European Dollar" has gradually spread to the world due to the United States' continuing trade deficit.