If the essence of modern eurodollar money is bank balance sheet capacity, then we need not wonder what has gone wrong or why. The very heart of this global currency system no longer beats so healthy and strong. Global banks shrink rather than expand at a breakneck pace, their desire to do the latter restrained by the incapacity of the system to manage what’s left.

In very general terms, it is really simple; banks that can’t make money in this money aren’t going to make their balance sheet capacity available to others. Since the system is incestuous in this crucial respect, it becomes merely self-reinforcing.

Contraction here means non-linear contraction, though quite a few firms have shrunk on an absolute basis, too. In other words, the rate of growth matters the most in testing the difference between eurodollars abundantly available on a global basis, or eurodollars increasingly tight and at odds with economic growth.

QE has been entirely absent in this regime, apart from a few temporary outliers. As I wrote in December 2015 in claiming why this “tightness” will continue:

QE was supposed to create a recovery and thus great profit opportunity, but the absence of QE leaves banks to only leave, meaning no profit and thus truly no recovery. This financialism becomes the economic misimpression that “unexpectedly” showed up this year to spoil the self-congratulatory party as the FOMC tries over and over for a lift off.

As this point is pressed home over and over, as each bank cuts back and restructures against FICC, the “dollar” only cuts deeper and deeper into the financialized global economy and makes it only less opportune for what balance sheet resources remain; and round and round we go.

Almost two years later, the banks in their Q3 2017 earnings report still can’t make money in this money. They have shifted conveniently in their excuses, this time talking about the lack of volatility depressing FICC, or the colloquial “bond trading.” They can’t make money when volatility is high, and they can’t make it when volatility is low, suggesting (again) volatility in the conventional sense isn’t really the problem.