Are the makings of a dollaryuan market already in motion?
If America plays its cards right, the weaponisation of dollar swaps could seed a major offshore dollaryuan hub — one that locks Beijing into dependence on Washington for decades.
Below was originally published on our sister site The Blind Spot on Thursday.
As already noted on Wednesday (in the Blind Spot), I have a sense of what may be coming next.
It’s not something that lends itself to a neat, linear explanation, so rather than forcing one, I’m going to lean on the principles of cartography journalism and sketch the contours of the theory out first, while letting the detail fill in over time.
I certainly won’t get everything right. This is uncharted territory, and there will be missteps. But I’m confident enough to begin framing the argument because I think I can see, at least in the distance, the outline of firmer ground that others haven’t yet mapped.
More details of the thinking inspiring this perspective can be read here:
For those who don’t want to wade through the full thread, the argument can be distilled to the following: eurodollar markets took root in London because the UK — unlike its continental peers—was geopolitically constrained from resisting American interests intent on fostering dollar funding dependencies.
Then, as now, eurodollars served as a tool of statecraft: a way to anchor Europe’s dirigiste and welfare-oriented tendencies within a system geared toward preserving the stability of Bretton Woods.
In this framing, the euro project was an attempt to break free from the eurodollar stranglehold by creating a rival centre of power insulated from external influence.
