2 months ago 30

$13 Trln in Offshore Cash Hanging Over US Economy Like Sword of Damocles, Regulator Reveals

The state of the US economy has become the top issue of the upcoming November election, with analysts and ordinary Americans alike warning about inflation, housing prices, and risks associated with America’s $35.7 trillion federal debt. Now, the nation’s top financial market regular says there’s another threat to worry about.

The $13 trillion in cash being held in offshore banks could threaten US and global financial stability in the event of a repeat of the 2008 financial crisis, which plunged much of the world into a years-long great recession, US Security and Exchange Commission chairman Gary Gensler has warned.

“I want to highlight an additional risk, though one in the banking, rather than nonbank, sector. As it relates to bank deposits, it’s not just the $20 trillion of deposits in the domestic commercial banking and credit union sector. There’s another $13 trillion of dollar funding offshore in non-US banks. Many of these overseas dollar deposits are uninsured. We’ve seen stress in Eurodollar markets disrupt economies around the globe, such as during the ’08 crisis,” Gensler said in a speech in Washington on Tuesday.

“Though the Federal Reserve operates central bank liquidity swap lines with select central banks, I believe there may be more work for those of us in the global regulatory community to ensure resiliency in the offshore Eurodollar markets,” Gensler added, pointing to measures taken after 2008 by the SEC to reform money market funds, and the additional “stress” placed on them “during the dash-for-cash in 2020” and the pandemic-era economic downturn that affected most of the globe.

Gensler's comments come amid warning signs that the US may be heading for a recession as investors and countries alike flock to gold - a well-established safe haven in economic hard times, and as nations of the Global South take baby steps to move away from US-dominated global financial institutions over their use to try to enforce the US-led economic and geopolitical world order.