Rise of the Global US Dollar

[Joe Leote]

Offshore US dollars are generated from thin air by the international offshore banking sector:

How the U.S. flipped Triffin's Dilemma into a USD Dagger & why the Rest of the World cant stop it.

The download link here opens a law review article as 97 page pdf:

"Where is a Bank Account? " by Joseph H. Sommer

The United States Fed and Treasury cannot "weaponize the dollar" without a functioning international legal system linked to the government policies of political allies. If the bankers don't obey the court orders, or the orders of the US Treasury, regarding sanctions or judicial orders, then the police take the bankers to jail in some jurisdiction. If there is no police jurisdiction over the criminals, or use of police force or military force against political adversaries, then the dollar are beyond the jurisdiction of US authorities. Trust in the dollar is in the rule of law via the judicial sector and use of police force. But the Sovereign US government exerts the dominant influence through the international government cooperation, commercial customs, and judicial customs.

Joe

[William Meyer]

Now remember class, only a small portion of eurodollars are call money, most are funded with time deposits.  Loans funded with time deposits then I take it are not 'out o thin air' as they have ceased to be money for the original depositors?  Only loans funded via call money can be argued to be 'out of thin air'?  

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[Joe Leote]

In the past I looked into the debit and credit operations on the bank balance sheets driven by financial deal-making customs. I have not researched how the term "call money" fits into the deal-making customs.

Keyword search posed to Google AI:

do eurodollar liabilities of banks equal the offshore eurodollar market valuation

Answer: No. Paraphrasing, the AI response says the net size of the offshore dollar market is drastically reduced if we consolidate the bank balance sheets to cancel out offshore interbank lending and borrowing. After one cancels out interbank positions, to get rid of double-counting, the net offshore dollars still exceed the eurodollar liabilities issued by domestic banks. This is called a money multiplier effect or result.

But it should just be understood that loans are created from thin air by the promises of borrowers and the credit analysis of bankers. The result of the process is a multiple of offshore dollars exceeding the domestic eurodollar liabilities. I think payment clearing occurs via what I call a "daisy-chain" back to the Eurodollar liabilities of domestic banks. Similar to how non-banks clear payment via transaction account liabilities except the Eurodollar market seems to be driven by interbank financial networking with remote banks dealing more directly with the non-bank borrowers.

Joe

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[William Meyer]

Grok told me the deposit/credit multiplier is usually around 1 but can vary between .5 - 1.5.  It can expand slightly from call money (demand deposit) but more importantly from central bank 'redepositing'.  Wouldn't surprise me if dollar swap chicanery can boost it further.

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[Joe Leote]

This paper on offshore dollars says FX Swaps are off balance sheet dollar liabilities are larger than other items on the balance sheets in the international US dollar markets:

02-offshore-dollar-and-us-policy.pdf

I need time to read the whole 40 page paper, but so far, I don't see any direct analysis of an offshore dollar multiple. The focus is on potential moral hazard, via proliferation of offshore US dollars, after the Fed provided central bank swap lines in 2008 and 2020. This paper is more like a condensed history of Fed policy with regard to offshore dollar defaults or financial instability in the international dollar. 

Joe