Dr. Steffen Murau| steffenmurau.com

2018 | ‘Offshore Dollar Creation and the Emergence of the Post-2008 International Monetary System’

This paper studies the transformation of the International Monetary System (IMS) in the run up to and after the 2007-9 Financial Crisis. Adopting a Money View perspective, it argues that the IMS, in contrast to wide-spread skepticism, does have a system-like quality. This paper understands the IMS as a US-centered hierarchical payments system within which short-term debt instruments are issued as credit money by various public and private financial institutions, in particular central, commercial and shadow banks. With the Fed located at the apex of the IMS, credit money forms denominated in US dollars are located highest up in the hierarchy and trade at par with each other, whilst they typically have fluctuating exchange rates to credit money forms denominated in the units of account of other monetary jurisdictions. From this, the paper argues that the key component of today’s IMS is the ‘realm’ of offshore US dollar creation, which is situated in between US dollar-denominated credit money issued in the US (‘onshore dollars’) and non-US dollar-denominated credit money issued outside the US. In this ‘offshore dollar realm’, non-US financial institutions are able to create international liquidity via US dollar-denominated private credit money outside the US. The paper systematically carves out the post-2008 setup of the offshore dollar realm with a focus on Eurodollar deposits, offshore money market fund shares, foreign exchange swaps and central bank swaps. With the institutional innovations materializing during the 2007-9 Financial Crisis, the IMS is now a public- private hybrid that fully mirrors the onshore US monetary system in the offshore dollar realm.

This discussion paper is the first in a series of two complementary pieces on the past, present and possible futures of the International Monetary System. It lays the theoretical and historical foundation for the paper “The Future of Offshore Dollar Creation: Four Scenarios for the International Monetary System by 2040”, authored by Steffen Murau, Joe Rini and Armin Haas (https://ssrn.com/abstract=3191786).

Presentations at the workshop ‘The International Monetary System in Financial Times’, Harvard University (06/2017), IIPPE conference, Berlin (09/2017), EAEPE conference, Budapest (10/2017), Finance and Society conference, London (11/2017), UWE Bristol research seminar (11/2017), ISA conference, San Francisco (04/2018), the workshop of the Politics of Money network, Brighton (05/2018), and the IGLP conference, Harvard Law School (06/2018)

Download link:
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3191981

 

Related articles

2021 | ‘Financial Globalization as Positive Integration. Monetary Technocrats and the Eurodollar Market in the 1970s’ (with Benjamin Braun and Arie Krampf), Review of International Political Economy

International political economy (IPE) has explained financial globalization as the result of states deciding to open up and liberalize domestic financial systems. Complementing this ‘negative integration’ view, we present a theory of financial globalization during […]

Learn More

‘Encumbered Security. Conceptualizing Vertical and Horizontal Repos in the Euro Area’ (with Alexandru-Stefan Goghie and Matteo Giordano)

Despite the paramount centrality of repurchase agreements (repos) in today’s market-based finance regime, both conceptual and empirical questions about European repo markets are insufficiently explored as contradictory legal and accounting treatments make their on-balance-sheet representation […]

Learn More

2021 | ‘The Hierarchy of the Offshore US-Dollar System. On Swap Lines, the FIMA Repo Facilities and Special Drawing Rights’ (with Fabian Pape and Tobias Pforr), GEGI Study February 2021

While it has become common to regard the international monetary system as hierarchical, the nature, shape and origin of this hierarchy remain often vague. Taking on board insights of critical macro-finance, this GEGI Study conceptualizes […]

Learn More