Wrong Way Risk: Debt, Collateral, and the Machinery That Finances the United States (Paperback) (ISBN-13: 9798176230185)

On an ordinary Tuesday morning in September 2019, the cost of borrowing cash overnight in the United States - against the safest collateral in the world - reached nine per cent.

There was no crisis. No bank had failed. Inflation was below target and unemployment was near a fifty-year low. And the machinery that moves several trillion dollars a day through the American financial system had, for a few hours, simply stopped working.

Wrong-Way Risk explains why, and why it keeps happening.

An American government bond is not principally an investment. It is collateral - an instrument convertible into cash on demand, which is what the wholesale financial system uses as money. When that conversion fails, everything else stops. It has failed in 2008, in 2019, in 2020, and the machinery built to prevent it is running again now.

Grigoris Garipis traces the mechanism through the repo market, the Japanese institutions that quietly financed America for a generation and are now coming home, and a debt stock that has passed forty trillion dollars while its average interest rate climbs toward the market's.

This is not a book about an American default, which cannot happen, or the end of the dollar, which is not occurring. It is about something slower and better documented: how developed-world debt is neither repaid nor defaulted upon, but eroded - by decisions that are, individually, entirely correct.

Twenty-three chapters. Five parts. Every figure sourced, and every scenario stated with the evidence that would prove it wrong.