Does Europe Need a Supranational Safe Asset? Doom Loops, Convenience Yields, Brunnermeier's ESBies, Tranching vs Mutualization, ECB Collateral Haircuts, and NextGenerationEU

Deep End Era. Engineering with Sankalp · Oct 29, 2026 · 1h 5m

In the United States, a financial panic sends investors fleeing from corporate stocks into U.S. Treasury bills—keeping dollars inside the same fiscal and banking system. In the Eurozone, a panic sends capital fleeing across national borders out of Milan and Madrid into Frankfurt, starving peripheral banks of collateral while driving German Bund yields deep below repo rates. Would a supranational European safe asset permanently break the sovereign-bank doom loop, or merely create moral hazard and a bigger continent-wide tail risk? In Episode 472, we work through information-insensitive…