How Eurodollars Work Explained in One Minute: From Definition and History to Market Importance

Simply put, the term eurodollar describes US dollar deposits held outside the United States and therefore not regulated by the Federal Reserves, not insured by the FDIC and so on. As strange as it may sound, eurodollars also refer to dollars held in let's say Asian or African banks, don't let the name trick you into thinking it only describes dollars held in Europe.


As explained in the video's quick section about the history of the eurodollar, the name has its origins in the period that followed WWII, a period which had the reconstruction of Europe in the spotlight, a reconstruction funded by... you've guessed it, a lot of US dollars, both directly through the Marshall Plan and indirectly through the exports of recovering European companies to the US, which revolved around them sending goods and receiving dollars in return.


Many observers make the mistake of underestimating the importance of the eurodollar market, of not realizing that we are dealing with a market in the double-digit trillions and including it in their decision-making process accordingly. This video explains, among many other things, why it's crucial not to be one of them :)