Outsourcing Empire: International Monetary Power in the Age of Offshore Finance

Dr. Andrea Binder

 
in: International Studies Quarterly

open access: https://academic.oup.com/isq/article/68/4/sqae123/7814683?login=false

 

Abstract:

Offshore finance enables foreign banks to create U.S. dollars under the legal framework of offshore jurisdictions. This bifurcates the shared monetary creation power of states and banks across borders, combining the U.S. dollar with predominantly English law. Empirical evidence reveals that more U.S. dollars are created offshore than onshore within U.S. jurisdiction. While offshore finance increases global liquidity, it also amplifies risks and intertwines the issuing country, offshore financial centers, borrowers, and global banks. This alters the inherent power dynamics of money itself. Consequently, international monetary power now hinges on accessing offshore dollars, controlling international liquidity, and navigating the associated rules. This power is constrained by the hierarchical social credit structures underlying money. For the United States, international monetary power has evolved into a form of indirect rule, delegating the authority to create U.S. dollars to global banks. As with other cases of indirect governance, this involves a delicate balance between geographical reach and centralized control.