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

‘The Evolution of the Offshore US-Dollar System: Past, Present and Four Possible Futures’ (with Joe Rini and Armin Haas)

Little has contributed more to the emergence of today’s world of financial globalization than the design of the international monetary system. In its current setup, it has a hierarchical structure with the US-Dollar at the […]

Learn More

‘States, Markets – and Technocrats. Revisiting the Origins of Financial Globalization’ (with Benjamin Braun and Arie Krampf)

International political economy (IPE) has explained financial globalization as the result not merely of market pressure but of states deciding to open up and liberalize their financial systems. Challenging this ‘negative integration’ view as incomplete, […]

Learn More

‘Quantitative Easing, Central Bank Independence and the Seeming Fundamental Difference between Monetary and Fiscal Policy’ (with Tobias Pforr)

Quantitative Easing (QE) has become the main new central banking activity after the 2007-9 Financial Crisis. Conventionally referred to as an ‘unconventional monetary policy’, the Federal Reserve has recently called it the ‘new normal’ of […]

Learn More

Leave a Reply

Your email address will not be published. Required fields are marked *