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.

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Edit (probably over 20 minutes after posting):

However, I should have added, that this generally occurred between 1998 and 2004.

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[–] 3 points 8 hours ago (4 children)

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)

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  • [–] [S] 3 points 8 hours ago* (3 children)

    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.

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  • [–] 2 points 8 hours ago (2 children)

    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

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  • [–] [S] 1 point 4 hours ago (1 child)

    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.

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  • [–] 1 point 1 hour ago

    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.

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