00:01
When banks borrow from abroad to lend domestically, we know that they're going to be borrowing that foreign currency from wherever they're borrowing from.
00:07
But then they're going to be lending it domestically, meaning they need to exchange that foreign currency for domestic currency, making that currency subject to whatever exchange rate is currently prevailing, meaning that as the exchange rates fluctuate over time, which they do naturally, but suppose one crashes dramatically, well then these domestic banks are going to face the issue of this exchange rate.
00:32
So all of a sudden what they borrowed is not worth what they need to repay.
00:36
And that's because of whatever fluctuation has occurred at the exchange rate.
00:40
However, when we look at the u .s.
00:42
Banking industry, they tend not to be subject to this issue.
00:45
And that's mainly because the u .s.
00:47
Dollar is known as a vehicle currency.
00:54
And essentially what that means is that the u .s...
