Seems to me that we might not even need gunboats for it.

After all, what's been stashed away there isn't gold, or factories, or steel - it most probably isn't even the physical tokens we use to represent money. Sure, somewhere there's a lot of suitcases with $ and € bills in them, but the bulk of the money is in bank accounts, not in suitcases.

Presumably, the flag-of-convenience country banks have lent that money on the global interbank market, rather than kept it as cash reserves (following the same logic that says that the "man with suitcase" delivery method is unlikely).

If that's true, we should see debts from the banks of the countries that the money has been lent to to the banks of the flag-of-convenience countries. Presumably, this is in no small part the countries from which the money has been stolen (because typically, the procedure would be that an individual asks his bank to "move" money to - say - Switzerland, which means that the bank changes its books to say that it now owes the Swiss bank the money, and does not owe the guy anything, and the Swiss bank changes its books to say that it owes the guy money, and the guy's home bank owes it money).

So we could institute a law saying that if a country has been found by a court of law to not cooperate satisfactorily with the tax authorities, according to certain specified criteria (including relaxing bank secrecy in connection with tax fraud investigations), all sovereign debt to said country would be declared void immediately, and all interbank debt to the country would become debt to the government instead.

Then the Swiss banks become insolvent, because they now owe the tax cheats more money than they are in turn owed by the tax cheats' former banks (i.e. more than zero). Even a one or two large economies enforcing such laws - say Germany and Scandinavia+Finland or Germany and France - might cause bank runs in flag-of-convenience countries.

And all of this is accomplished without ever violating any other territory's sovereignty. We only take legal action against banks operating in our own jurisdiction. The fact that there is some - ahem - fallout for certain disreputable countries is both completely intended and in fact the point... and also completely Somebody Else's Problem.

So why can't this work?

- Jake

If you only spend 20 minutes of the rest of your life on economics, go spend them here.