The country is small:
It’s less than 10 000 sq km in area, has fewer than 1 million people, and GDP less than about US$50 billion. It might have a coast. It’s a liberal democracy, or at least mostly a liberal democracy. It’s been independent for almost 100 years, attempts a strong neutrality, and is thus generally non-aligned.
I suppose the country’s currency is hard, or reasonably hard, enough that it can be freely exchanged.
In this country you can bring a gym bag with US$1 million (say 10 000 $100 bills) in or out of the country. There are banks there which you can deposit the money, and while they might be required to report this to the government, the government won’t tell the governments or other international organizations about it.
What would be the consequences for such in international relations?
Thank you.
Edit (probably over 20 minutes after posting):
However, I should have added, that this generally occurred between 1998 and 2004.
In the real world you could look at Nauru, which was a very low tax money laundering haven in the specified time frame. Though its a very small country with an interesting history.
The reaction of other states probably depends on how big of a problem that state is in the grand scheme of things. When the money laundering is too severe at some point international alliaces will impose sanctions, cutting of money tracks. For that to not destroy the countries economy, they would need powerful external friends. Probably some kind of world powers, that hold a protecting hand over them for geopolictical strategy.
Also: In such a place there would be people from all over the world, even the big world powers, doing shady bussiness. For the secret agencies of big countries such a money laundering haven can be a good opportunity to pipe money to some cronies. Think of the CIA financing groups of terrorists/militias to disturb a too socialist country, or even bringing its government to fall and be replaced by one doing the US favors (Osama bin Laden comes to mind).
points at switzerland
I thought the US and others have pushed Switzerland to do more reporting and disclosing.
As they and any other power would you fictional country.
For yours to work you have to answer questions like Switzerland.
Why didn’t others invade? Swiss mountains make that hard as hell. What about an economic blockade? Strong economic ties to many countries, neutrality in wars, value outside economics (craftsmen). How can their money still be valuable under such stress? Economic wizardry.
Different answers exist of course but that’s what the swiss are doing
As I’ve presently imagine it:
The country isn’t so much mountainous as it is hilly. I suppose the skiing there isn’t great and maybe limited to several weeks at most. I describe it as a place where snow falls, but where wild palms and citrus can grow in a microclimate. Part of it is a swamp that leads to the coast. There isn’t a natural harbor, and the water nearby is too shallow, but at least they have air access.
They were occupied until the early 20th century. Lead by a great leader (and maybe with a few Americans who aren’t all that pro-American) employing strategies and at times brilliant tactics against their indolent and incompetent occupiers, they get independence.
They make a treaty with this country and 3 others. These countries together might be the size and area of one of US’s smallest 40 states.
The guerilla leader turns out to be a good political leader, who at the beginning might be semi-authoritarian. He pursues strong neutrality and self-reliance, and with mixed results, industrialization. There is probably conscription in the first few decades. They declare war on Germany in very late March/early April 1945 (they also try to figure out what to do with their millions of Reichmarks).
Why didn’t others invade?
They have hills and swamps, unique language, decades of self-reliance and some preparation, and pretty well no natural sources of petroleum and natural gas.
What about an economic blockade?
A US battleship might get run aground if it comes too close, aircraft carriers (IIUC) are expensive to run, and a smaller ship might get sunk by them and force a more intense response from the US. IIRC, Bill Clinton was less interventionist than Bush (either of them), Dubya Bush was too busy with Afghanistan and Iraq, and under Trump, Hasan Piker might spend a week or 2 visiting the country and giving autographs, yelling “Viva la [name of the country]!”.
Strong economic ties to many countries, neutrality in wars, value outside economics (craftsmen).
They buy from pretty well everybody (with maybe some not too costly tariffs), sell to pretty well everybody, and are neutral (today they trade with Russia while maybe 100 of their citizens are in Ukraine’s international battalions).
Legit sounds like an interesting setting
Dunno, but US isn’t the only country.
Switzerland definitely continues to be a haven’t forgotten most illearned wealth from all over the world.
I suppose the country’s currency is hard, or reasonably hard, enough that it can be freely exchanged.
Why wouldn’t it just be another dominant world currency, like the dollar or the euro? In real life, banking havens in other countries still actually keep the accounts denominated in a currency that country doesn’t necessarily control: either pegged to a reserve currency or directly in that reserve currency itself.
As I’ve replied elsewhere ITT:
I’m thinking that their currency is pegged to a basket, which includes gold, silver, USDs, €, £, ¥, and Swiss francs.
I’m not quite sure how banks work.
Like if a bank takes the gym bag full of money, what do they do with the US$1 million. Do they put it in a vault with perhaps US$100s of millions, as well as also those of extra currencies?
When you deposit physical cash at a bank, the bank accepts the money, and records that in its books to show that your account has a higher balance. The account balance itself is your asset, and the bank’s liability. So when you have an account balance of $1000, that’s the bank owing you $1000, that they have to pay you at any time, on demand. They can pay it to you with physical currency, if you show up to the bank and say you want to withdraw the balance in cash. Or they can honor your demand to pay someone else on your behalf (through a paper check, electronic funds transfer, etc.).
Like if a bank takes the gym bag full of money, what do they do with the US$1 million
They can hold onto it, or deposit it somewhere else, in exchange for their own balance with some other financial institution.
The overwhelming majority of money in the modern system isn’t physical. It’s just records in a ledger: paper in the days of paper records, or digital records in the modern banking world. So although physical cash can move around, on the back end, the banks are mostly dealing with each other in updated ledgers, not physically moving physical currency. I might have a credit card account and a checking account with a bank, and I spend with my card in a way that increases the balance of the credit card, and then use my checking account to pay my credit card balance, and then all that gets resolved without any physical currency changing hands. Including with the merchant, who might accept credit card payments electronically, and then pay their employees through electronic payments as well.
Currency exchange is done by supply and demand. A small country with its own small economy and a floating currency is going to be vulnerable to swings in foreign exchange rates, so that country will likely need to hold a lot of reserves to shore up their own currency value, knowing that they have the foreign currency and gold to be able to trade it for their own currency, and keep the supply and demand for their own currency from completely swinging the value back and forth.
So if it’s a country that just uses dollars, and someone shows up with a bunch of dollars, their deposit helps shore up that bank’s own reserves of physical cash. Or if someone comes in with an electronic transfer of dollars to their account in the bank, that bank now has a higher balance of dollars on its records (recognized by the other financial institutions).
Adding a currency exchange component to this whole thing sounds like an unnecessarily complicated side quest, if you’re just trying to tell a story.
Okay and thank you for your reply.
Having their own currency is a pride thing. Having it pegged is a concession to the need to have it backed, but pegged to a basket means they aren’t totally financially beholden to anyone bigger than the country.
They also have notes that are worth more than US$1000: one might not need a gym bag of US bills when it could be replaced with a fanny pack of the country’s currency.
The amount of money the US has is, IIUC, slightly over $2 trillion. This country’s currency probably totals to less than 1% of that.
As it is, I imagine the bank would do with the dollars as you’ve described.
The thing is, some US regulators, bureaucrats, and politicians—maybe some from the FBI, DEA, and a few other agencies—as well as those of other countries who have their own drug warriors, would want to inhibit such transactions.
I can easily imagine that they might push their banks to not deal with these types of banks in my fictional country, perhaps none of the banks or other financial institutions in that country, until that country changes the laws and gets in line.
With the Russian-Ukrainian war these past few years, I’ve been hearing about sanctions against Russia and some Russian YouTubers are talking about how hard it is to get money back to their relatives. Presumably Russia deals with partially this by maintaining a banking system in Russia where people in, say, Saint Petersburg and Vladivostok, could exchange money, including electronically, and as some countries still trade with Russia, transfers between these cities and, say, Belgrade, Brasilia, and Beijing (hey 3 "B"s!), might be similarly easy.
Some of these countries might not be too concern with this country allowing the aforementioned drug laundering because they control their own drug trade with repression. Idk.
I wonder if these would happen, and by how much, and how my fictitious country would cope with such.
The amount of money the US has is, IIUC, slightly over $2 trillion.
About $5.5 trillion. Which, through banking, is multiplied as a money supply of about $23 trillion.
Honestly, my take is that you shouldn’t get into the weeds of foreign currency exchange, money supply, etc., in a fictional work unless you already have a strong grasp of the concepts involved. I personally don’t, just some macroeconomics coursework decades ago in college, but I know just enough to see when things don’t look right. If the plot allows for you to hand wave away how it works, you can just model things after existing banking havens throughout post-Bretton-Woods history.
I mostly agree
However, in my story—as I presently have it—at least one of my characters—and a possible protagonist—lives in the US as an illegal alien, builds a drug empire (mostly marijuana, nor is he violent—he’s not a Vito or Michael Corelone, Tony Montana, or that guy in Breaking Bad), and then he, if you will, between 1998 to 2004, “cashes out” by laundering his money—in the $100s of millions—in varying banks, perhaps those of this country, and assumes a new life as a citizen there, somewhat of a playboy, who spends most of his time in the country, while running legitimate businesses he bought or started there. He then rarely, if ever, goes to the US.
Would this be possible for him in this country as the US and others continue their war on drugs?
Just hand wave away the “how,” if your story is about the person rather than about the laundering techniques. Just say that he has been laundering money and finally built up enough legitimate-seeming wealth that he can hold overseas.
Not every story needs to have an Andy Weir style explanation of the nuts and bolts of how each step progresses. Unless that’s what you want to do, in which case you better start consulting people who really know this stuff.
Good point, however I suppose I’m writing 2 versions of the story, with 2 descriptions:
the first is for me, where I figure out, if not everything, then nearly everything, in the story; so if someone asks, “what about this?” I can answer it. It also helps with my imagining the the story as I write it.
the next is for readers, or possible readers, who get a more abbreviated versions.
Though there is the possibility that a reviewer, instead of giving me a hard time over the impossibilities, might come up with real world examples, or examples-of-sorts, of elements of my story.
Is this for fiction or real life?
Anyway that describes lots of places. If you want an independent country try Monaco.
It’s a fictional country.
I find 2 problems with writing about real countries, I suppose small ones in particular:
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They might not be good for my story. Monaco is too small for one of my characters, Switzerland is landlocked.
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Someone who knows a lot about the real country, such Monaco or Switzerland, perhaps someone who lives there, might say: “Oh, that’s not right, in [the country they know about] they do it this way.”
That said, I want the country to be realistic enough that it would fit in the real world and exist, at least more or less, as I described it. That’s why while I want it to be big enough to be viable, but small enough for a realistic enough fit.
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Depends on how it is framed. If it is a cryptocurrency exchange where dollars turn into locally backed stable coin currency equivalents. Then no one will care.
Okay, that’s good.
However, I should have added, that this occurred between 1998 and 2004.
If the currency was gold or oil backed, then the worst thing that could happen is that they would be cut off from the US controlled banking system which effectively means that they would be paying a 1.4% interest premium for any national debt services. But aside from that, no meaningful impacts.
If it wasn’t backed by gold/oil then they would have more of a problem but then I would need to know more about their international exports (other than the dollars that they are laundering)
They aren’t resource rich, but they have a reputation for self-reliance. If it wasn’t for tourism they probably would have a trade deficit. I’m thinking that their currency is pegged to a basket, which includes gold, silver, USDs, €, £, ¥, and Swiss francs.
Ok, then they are going to have a serious problem trying to launder money because they can’t hide more than 40-60% of what they get via tourism (which puts a very hard cap for how much they can launder) and if they get caught they will lose everything.
Which means they will have to pour more than half the profits from money laundering to improving their tourism sector
I don’t think trade deficits matter that much, or if they really exist (if 100 million Americans bought US$100 billion in Chinese electronics, the Chinese get the money and the Americans have the electronics—where’s the deficit when both got what they wanted?).
I don’t know what the banks would do with the cash, but I figure they would find a way to use it.
That is a fair perspective to have on a personal level but outside of the US banking system. Why would anyone assign any value to the US dollar?
The only reason why a US dollar has any value is because you can recycle the dollars into oil (or gold or silver or platinum).
Now that oil/dollar recycling was killed by Trump, the global demand for US dollars is collapsing slowly as countries try to unwind their dollar positions.
The question of the value of any currency is what can you get with that currency. That is why trade deficits ultimately disappear. It ultimately accumulates and impacts future prices.
