Pennings, A.J. (2026, Mar 28) USD Shortages and Global Solutions with Bancor/ICU and (SACT)AI. apennings.com https://apennings.com/global-e-commerce/usd-shortages-and-sactai-solutions-for-the-global-economy/

Introduction

What is the impact of USD shortages, and how can Bancor/ICU help alleviate world trade and finance problems due to the inability of the US and Eurodollar markets to provide sufficient liquidity?

The literature is remarkably consistent on one point. The global economy is structurally dependent on USD liquidity, but the system that supplies it (US deficits plus Eurodollar banking) is inherently unstable and insufficient. Dollar shortages are not rare anomalies; they are recurring features of the system, especially during stress.[1]

This post attempts to provide a research-grounded synthesis of (1) the impact of USD shortages and (2) how an alternative system using an SACT (Substitution – Abstraction – Symbolic Computing – Telecommunications Synchronization) spreadsheet logic with AI architecture could structurally solve those constraints. I am exploring John Maynard Keynes’ Bancor and International Clearing Union (ICU) proposal at Bretton Woods in 1944 to directly address this problem of USD shortages, which in all probability stems from the absence of a symmetric global liquidity-provision and coordinating mechanism.

What are USD Shortages?

A USD shortage is not a lack of physical dollars. It is a shortage of dollar-denominated balance sheet capacity in the global financial system. Global trade is primarily invoiced in USD, most debt is denominated in USD, and the most efficient collateral is USD Treasuries.

However, USD is created primarily through US fiscal spending, the US banking system, and Eurodollar offshore lending (and to some extent, Fed open market operations as bank reserves). When these channels tighten, the world runs short of usable dollars, and the currency’s price rises.

The Role of the Eurodollar System

The Eurodollar system historically solved this problem by allowing non-US banks to create USD liabilities. This expanded global dollar liquidity by loans created beyond US borders. But research shows even this system is fragile. It is reliant on wholesale funding markets,
vulnerable to liquidity shocks, and dependent on confidence and collateral flows. During crises, Eurodollar liquidity contracts sharply and the rush to USD safe haven intensifies the problem.[2]

The Eurodollar system is a $60–90 trillion shadow balance sheet. It is far larger than the US domestic system and held together by $15–20 trillion of continuously rolling dollar funding needs. The most important number is not notional size but how many dollars must be rolled over continuously. Approximately $15–$20 trillion (Howell considers this much higher). This is the true “heartbeat” of the Eurodollar system

This creates instability because this system relies on short-term funding, depends on confidence, and requires continuous refinancing. When stress hits, rollovers fail. Also dollar demand spikes and the system contracts rapidly.

Impact of USD Shortages on the World Economy

USD shortages force trade contractions, position deleveraging, and exchange rate instability. They require crisis-driven liquidity provisions from central banks and governments. When dollars are scarce, importers cannot access trade finance, letters of credit decline, and shipments are delayed or canceled. Even when the goods are available, trade stops due to settlement constraints.

Under these tensions, companies and banks sell assets to raise USD and often unwind positions for liquidity. After a historic rise in gold prices, the metal declined significantly following the US-Israel attack on the Iranian regime, as it was sold for much-needed USD. Banks reduce lending in the face of uncertainty, and the price of a “haircut” (cost to cover potential liquidity challenges) that accompanies collateral for Eurodollar lending increases. These challenges lead to “fire sales,” falling asset prices, and financial contagion.[3]

Another issue is exchange rate liquidity. Countries without sufficient access to USD experience currency depreciation, face rising import costs, and often encounter inflation shocks. These liquidity problems and their consequences are especially severe in emerging markets.

The result is an amplification of global inequality as dollar shortages are not evenly distributed. Access depends on geopolitical alignment, central bank swap lines, and financial system integration. The system becomes hierarchical rather than neutral.[4]

The only reliable solutions today to acute USD shortages are the Federal Reserve swap lines and IMF interventions. But these are discretionary, political, and reactive to the crises rather than proactive. Liquidity is provided only after instability emerges, not before.

The Structural Problem

The prevailing global currency system has a fundamental flaw. Global liquidity depends on a national/global currency (USD). It is not, as Treasury Secretary Connally announced to his G-10 counterparts after President Nixon severed it from gold, “The dollar is our currency, but it’s your problem.” The USD is the world’s currency, and much of it is produced offshore.

This paradox creates a contradiction. The US must run deficits to supply dollars, but excessive spending erodes confidence. Military bases spread dollars but are unsettling in times of violence. Eurodollar markets extend liquidity but become unstable when political and economic problems undermine the validity of collateral.

This is the modern version of the Triffin dilemma. Robert Triffin pointed out in the 1960s that too many US dollars went into the world after World War II due to the Marshall Plan, increased trade spending, and payments to build and provision military bases. These dollars had a claim on the gold supply at Fort Knox at 35 dollars/oz. Led by France, countries began requesting gold for the dollars they held, forcing Nixon to “close the gold window” in 1971.[5]

How Bancor/ICU Solves This Problem

Keynes’ insight was simple but radical. He suggested separating global liquidity provision from any single nation and the Bancor as a neutral unit of account. Instead of requiring USD, trade would be settled in Bancor units, and countries hold accounts at the ICU.

But at the time, the technology for such a system was not available. The telegraph and radiotelephony were slow and unreliable. Punch card tabulators were unlikely to keep up with the processing demands of such a system. The USD-gold standard prevailed, creating the largest expansion of wealth creation in global history. But not without stress and eventual calls for “de-dollarization.”

However, a new system based on something like (SACT) AI could alleviate some of the tensions by aggregating and configuring wealth and providing the automation needed for global clearing and settlement. Clearing is the process of validating, reconciling, and transmitting payment details between banks to calculate obligations, occurring before money moves. Settlement is the final step, when funds are transferred to discharge the obligations and complete the transaction. Clearing verifies the “what,” and settlement transfers the “cash.” This could mean less dependence on US deficits and spending, and less need for Eurodollar lending.

The ICU with (SACT)AI would provide liquidity through overdraft facilities, balance clearing, and symmetric credit/debit accounting. Liquidity expands with trade itself. Would this mean no external funding constraint?

Keynes’ key ideas came about because he was quite aware of the problems faced by the British Empire and knew the pressures faced by
deficit and well as surplus countries. These were causing persistent imbalances and global demand shortages.[6] In the current system imbalances accumulate and crises force adjustment. With the ICU system imbalances are corrected continuously.

How (SACT)AI Makes Bancor Feasible Today

This is where the framework based on spreadsheet logic and powered by AI becomes powerful. Historically, Bancor failed because data transfer was slow, verification was weak, and coordination was manual. It was technologically primitive compared to today’s microprocessing and storage technologies. (SACT)AI removes these constraints.

– Substitution (Vision + Data) provides real-time measurement of trade flows and no reliance on delayed reporting.
– Abstraction transforms all data flows denominated into interoperable units (Bancor + currencies).
– Computing (AI) provides continuous imbalance detection, temporal modelling, and dynamic liquidity allocation.
– Telecom enables instant global synchronization of news and prices.

Solving USD Shortages in a Hybrid System

In reality, Bancor would likely coexist with USD, not replace it entirely in the new (SACT)AI architecture. Consider the following three-layer architecture that is the core of the entire framework. The key is to understand that each layer solves a different constraint in global finance. Currently, USD shortages happen because today these layers are collapsed into one. Today’s system tries to do three different jobs with one thing (the USD). It tries to store value (collateral), move money (settlement) and coordinate the system (global imbalances). That’s why it breaks into crises.

The hybrid system separates these functions into layers. The first is collateral. This is the balance sheet base of the system. US Treasuries and possibly other sovereign bonds later provide the foundation. Collateral answers one question, “What is trusted enough to back the system?” Treasuries dominate because they are liquid, deep, and widely accepted. Also, they are legally enforceable.

Why it matters for USD shortages? USD shortages are often collateral shortages in disguise. Banks can’t expand balance sheets without collateral. Repo markets seize when collateral is scarce. Eurodollar lending contracts when Treasury access tightens. So even in the new system, Treasuries remain the gravity center of global finance.

The second layer involves settlement. It provides the “plumbing” and facilitates how money actually moves through blockchains and networks. USD stablecoins (tokenized dollars backed by Treasuries), CBDCs (central bank digital currencies), and payment rails (SWIFT, blockchain, RTGS systems). It answers the question “How do transactions get completed?”

This layer handles trade payments, financial transfers, and collateral movements. Stablecoins matter here by tranforming settlement. It makes it faster (real-time), global (no banking hours), and programmable (conditional payments). But crucially, they are still claims on Treasuries and do not solve USD shortages. Even with stablecoins, USD backing is still needed and will depend on Treasury supply and rely on dollar funding markets. So stablecoins make the system faster, but not more elastic.

Layer 3 provides the coordination, the missing piece. This is the Bancor/ICU layer works with (SACT)AI that tallies the global ledger of trade balances, offers a credit/debit system between countries, and provides a mechanism for liquidity allocation.

This layer answers the question, “Who gets liquidity—and when?” It monitors trade imbalances, capital flows, and global demand. This layer is revolutionary because today there is no true global coordination layer. Adjustment currently happens via crises, exchange rates, and IMF interventions. SACT-AI with Keynes’ ICU changes that as deficits are allowed (with limits), surpluses are penalized (critical insight), and liquidity systematically allocated.

Putting the three layers together we see that in today’s system, USD does everything. It operates as collateral, settlement, and coordination. The result is the global stress from USD shortages, trade collapses, and crisis-driven fixes.

How does the ICU alleviate USD shortages? It reduces dependence on USD as trades can clear in Bancor. USD is needed only for final settlement or collateral. It provides elastic liquidity, meaning that ICU expands credit automatically with no reliance on US policy. It also prevents trade collapse as imports continue even during dollar stress as financing is routed through Bancor accounts.

Designed correctly, (SACT)AI works with the Bancor to recycle surpluses efficiently with surplus countries required to redeploy capital. This reduces global imbalances. The key difference is constraint vs. coordination. In the current system, a lack of available USD threatens trade volatility and produces crises. With Bancor/ICU system, rules (balances, limits) provide continuous coordination resulting in enhanced flows of capital, goods, and services.

The reliance on the USD alone tries to do three different jobs. It stores value (collateral), moves money (settlement), and coordinates the system (global imbalances). Consider another contigency, a hydrid system that separates these functions into layers.

Layer 1 still involves Treasuries as a store value that continues to anchor trust.

Layer 2 uses Stablecoins and CBDCs on blockchain networks to move money efficiently

Layer 3 Bancor/ICU with (SACT)AI decides how liquidity flows globally.

How does this address USD shortages? It starts with trade that needs financing. Consider the scenrio where Country A wants to import from Country B. Today it must obtain USD. If unavailable, trade stops. In the hybrid system, the transaction is recorded in Bancor (Layer 3) and ICU extends credit (temporary deficit). Trade continues without immediate USD. Settlement happens separately and stablecoins (Layer 2) handle payments where needed. But not all flows require USD simultaneously.

Collateral Anchors the System

Treasuries (Layer 1) back stablecoins and enhance financial system confidence. The old constraint was “Do you have dollars?” The new constraint is “Are you within system rules (ICU limits)?” In the current system, USD is the fuel and engine of the economy but also the traffic control, If the “fuel” runs out, everything stops.

In the new system, Treasuries are the fuel and stablecoins are the engine while Bancor/ICU becomes the traffic control system. If fuel is tight, traffic system reroutes flows and system keeps moving.

Why is this a powerful alternative? Because it separates liquidity creation (ICU) from liquidity backing (Treasuries). The deeper insight is that USD shortages happen because the world relies largely on a national balance sheet to fund a global system that runs into economic and political limitations. The hybrid model fixes this by making liquidity a global system function, not a US byproduct. Treasuries provide trust, stablecoins move money, but only Bancor/ICU decides how liquidity is distributed. This turns dollar scarcity from a hard constraint into a manageable coordination problem.

The three-layer architecture is the core of the entire framework. The key is to understand that each layer solves a different constraint in global finance. USD shortages happen because today these layers are collapsed into one. But it is only now, with the introduction of (SACT)AI that the technical means are available to accerlerate and distribute such a load in the service of world trade and equitable wealth.

Final Insight

Global USD system size is $60–$90 trillion. Structural shortage during stress ranges from $5 to $13 trillion. The current system can only supply a few trillion dollars in a crisis. In contrast, a Bancor/ICU system could dynamically generate liquidity comparable to or greater than that of the USD balance sheet, without relying on the USD balance sheet. Bancor ICU and (SACT)AI have a potential liquidity of $5–$15 trillion, but it is elastic.

USD shortages reveal something fundamental. The global economy is not constrained by resources, it is constrained by accounting and financial architecture. The Eurodollar system extended the USD architecture, but imperfectly. Bancor/ICU, especially with (SACT)AI, replaces it with a designed global clearing and settlement system in which liquidity follows economic activity, not the balance-sheet capacity of a dominant currency.

Notes

[1] See McGuire & von Peter, 2012; Goldberg et al., 2010; Murau et al., 2023.
[2] Coffey et al., 2009; Baba & Sakurai, 2012. The Bank for International Settlements (BIS) estimates that non-US borrowers’ USD debt are in excess of $13–$15 trillion (loans + bonds) while the off-balance sheet USD obligations (FX swaps/forwards) near some $80 plus trillion notional with $15–$20 trillion effective funding need)
Borio et al., BIS 2022
[3] Goldberg et al., 2022
[4] Murau et al., 2023.
[5] My MA thesis was on how deregulation and technology facilitated the transition from the global USD linked to gold to the USD fiat currency.
[6] Eichengreen, 2019

Key References

Borio, C., McGuire, P., & Schrimpf, A. (2022). FX swaps and dollar funding: A global perspective. BIS Quarterly Review. https://www.bis.org/publ/qtrpdf/r_qt2212e.htm
Baba, N., & Sakurai, Y. (2011). When and how US dollar shortages evolved into the full crisis. Journal of Banking & Finance.
Coffey, N., Hrung, W., & Nguyen, H. (2009). The global financial crisis and offshore dollar markets. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1496407
Eichengreen, B. (2019). Globalizing Capital: A History of the International Monetary System.
Goldberg, L., Kennedy, C., & Miu, J. (2010). Central bank dollar swap lines and overseas dollar funding costs. NBER. https://www.nber.org/papers/w15763
Goldberg, L., & Ravazzolo, F. (2022). The Fed’s international dollar liquidity facilities. NBER. https://www.nber.org/papers/w29982
Goldberg, L., Kennedy, C., & Miu, J. (2010). Dollar swap lines. NBER. https://www.nber.org/papers/w15763
Howell, M. (2020). Capital Wars.
Keynes, J. M. (1943). Proposal for an International Clearing Union.
McGuire, P., & von Peter, G. (2012). The dollar shortage in global banking and the international policy response. International Finance. https://bis.org/publ/work291.pdf
Murau, S., Pape, F., & Pforr, T. (2023). International monetary hierarchy through emergency US-dollar liquidity. Competition & Change.
Pozsar, Z. (2014). Shadow Banking: The Money View. Treasury / FRBNY.
Notes

© ALL RIGHTS RESERVED

Not to be considered financial advice.

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Anthony J. Pennings, PhD is a Professor at the Department of Technology and Society, State University of New York, Korea and a Research Professor for Stony Brook University. He teaches AI and broadband policy. From 2002-2012 he taught digital economics and information systems management at New York University. He also taught in the Digital Media MBA at St. Edwards University in Austin, Texas, where he lives when not in Korea.

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Tags: (SACT)AI Solutions > Bancor > International Clearing Union (ICU) > John Maynard Keynes > SACT > SACT (Substitution - Abstraction - Symbolic Computing - Telecommunications Synchronization) > USD Shortages

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