This book seeks to inform about a feature of monetary policy that is largely overlooked yet occupies a central role in the monetary and financial system, namely central bank collateral frameworks. They are much like G.K. Chesterton's famous “invisible” postman in that, like him, collateral frameworks are out in the open and utilized every single day of the year, but nevertheless go largely unnoticed. Unlike the postman, however, collateral frameworks are obscured by opacity. Those that care can look up the nitty-gritty of how collateral frameworks work by studying the relevant official documentation, but it is not trivial reading. Furthermore, to understand how collateral frameworks actually function, it is not sufficient to merely read the official rules, it is also necessary to supplement these with empirical facts that shed light on how those rules are implemented and what their consequences are. This book does both. Its main objective is to bring the importance of collateral frameworks more out into the open.

I do this through an in-depth study of the collateral framework of the euro area. This is an especially interesting case because of the banking and sovereign debt problems in the euro area and the ongoing efforts of the European Central Bank (ECB) to, in Mario Draghi's words, preserve the euro. The Eurosystem's collateral framework provides a novel and useful frame of reference for looking at the unfolding crisis. The book shows that the collateral framework is integral to the unconventional monetary policies pursued by the ECB in its bid to stave off the crisis. The book also lays out the general pattern of the ECB's unconventional policies to preserve the euro and shows that these involve indirect bailouts of banks and sovereigns, with some countries benefiting more than others.

As I thought I was nearing completion of this book in January 2015, several “euro events” occurred in rapid succession that I felt compelled to incorporate into my analysis because they reduced uncertainty with respect to future ECB actions to preserve the euro. This has led to a chapter on the endgame of the euro crisis to go along with a chapter on the euro's fundamental credibility problem and what to do about it.