Abstract The safety of repurchase agreements (repos) depends on the neoclassical premise that markets are reliable sources of liquidity; repos in practice disprove the theory by generating collateral calls, collateral sales, liquidity events, and liquidity-driven losses for repo-borrowing funds and their end investors. As repo-type lending now dominates money markets, borrowers’ self-protective preference for ‘safe assets’ as collateral has distorted financial markets, disrupting private investment, and economic performance. Using a balance sheet approach this paper explains the liquidity-supporting role of the traditional banking system and contrasts it with the liquidity-demanding repo-based financial system. The paper also argues that contractual structure determines the balance of power in private sector loans, that no private loan is ‘safe’ for both borrower and lender, and that repo has shifted the balance of safety decisively in favour of lenders.

中文翻译：

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回购协议和金融市场的（去）建设

摘要 回购协议（repos）的安全性取决于新古典主义的前提，即市场是可靠的流动性来源；回购在实践中通过为回购借款基金及其最终投资者产生抵押品要求、抵押品出售、流动性事件和流动性驱动的损失来反驳该理论。由于回购型贷款现在主导货币市场，借款人对“安全资产”作为抵押品的自我保护偏好扭曲了金融市场，扰乱了私人投资和经济表现。本文使用资产负债表方法解释了传统银行体系的流动性支持作用，并将其与需要流动性的回购式金融体系进行了对比。该论文还认为，契约结构决定了私营部门贷款的权力平衡，