The New Divide: Why Liquidity, Not Land, Defines Sovereignty

Canada’s quiet technocratic pivot reveals a new global split: mastery of cash flows versus sovereign leakage.

Please note: This article, like all my others, is not political. I make no specific endorsement of any political leader or party anywhere in the world.

The electoral victory of Canadian Prime Minister Mark Carney, a career central banker, wasn’t just politics — it signals a global pattern: liquidity, not land, increasingly underpins sovereignty. Image source

“Lead us, Big Daddy,” a woman screamed at an event for Canadian Prime Minister and Liberal Party leader Mark Carney in Scarborough, Ontario, this past April.

All cringe aside, the moment marked a clear catalyst in Canadian political life. Just a few months earlier, the upcoming federal election looked like a nightmare for the Liberals: polls showed only 16% of Canadians planned to vote for the party. Carney’s predecessor, Justin Trudeau, had been effectively hounded out of office amid intensifying calls for his resignation, leaving Conservative leader Pierre Poilievre poised to take power.

Then, a parallel chain of events unfolded with stunning speed, galvanizing the Canadian system in a completely different direction. The November election of U.S. President Donald Trump brought new tariffs on Canadian goods and loud calls to make Canada “the 51st state.” The rhetoric infuriated Canadians, with many donning Trump-style hats reading “Canada is not for Sale” and “Canada is Already Great.” By March, Carney — a reserved former central bank chief — won the Liberal Party leadership with nearly 86% of the vote and became Prime Minister. He had never held elected office and became only the fourth Prime Minister in Canadian history to take power without a seat in the House of Commons.

The April 28 election delivered results no one had predicted just months earlier: Carney’s Liberals handily defeated the opposition and gained seats, ending up just three shy of a majority government.

Carney’s unexpected rise represents more than a resurgence of economic nationalism. It signals a deeper shift in how Canadians imagine sovereignty and resilience in a world increasingly shaped by external shocks underpinned by liquidity systems. Canada, with its highly centralized, transparent, and tightly regulated liquidity architecture, responded to this threat the way it knows best: by electing a technocratic central banker to steer it through crisis. By rehabilitating a party that, after a decade in power, was headed for electoral obscurity, the system made clear what it wanted most — the kind of technocratic leadership that only a regime built on trusted, centralized liquidity could produce.

Liquidity as the new foundation of sovereignty

Sovereignty has long been understood as the power to control territory and enforce borders. Maps and armies were the ultimate symbols of statehood, the concrete markers of a government’s ability to project authority. Yet in an era defined by transnational capital, global supply chains, and instant digital transactions, this territorial framing feels increasingly outdated.

Today, the true backbone of sovereignty is liquidity: a state’s capacity to generate, anchor, and direct flows of value (money, especially digital payments). Control over liquidity determines whether a government can maintain social contracts, fund security apparatuses, and stabilize domestic markets in the face of external shocks.

Here lies the critical schism: states that consolidate liquidity — through centralized, transparent, and trusted systems — can reinforce sovereignty and adapt under pressure. In contrast, states that suffer from liquidity leakage, where capital quietly escapes into offshore havens and private survival networks, find their sovereignty hollowed from within long before any dramatic collapse becomes visible.

Whether through shadow reserves, offshore trusts, or digital asset flight, the silent migration of liquidity reveals where power truly lives — and where it is quietly dying. In this sense, the future of sovereignty will be decided not at the border, but in the bloodstream of value flows.

Under-regulated, opaque systems and sovereign leakage

Sovereignty is not lost all at once; it erodes quietly through small fractures in a state’s liquidity architecture. In under-regulated and opaque systems, value escapes through informal circuits, fueling rival power centers and weakening the state’s core. While these systems may appear centralized on the surface, they often conceal hidden leakage that hollows out actual sovereignty far more effectively than any external invasion.

China — scam centers and gray zone liquidity

China is often viewed as a monolith of centralized control, yet beneath this surface lies a fragmented landscape of gray zone liquidity. While the state nominally controls its financial system through strict capital controls and centralized directives, it simultaneously tolerates and indirectly benefits from peripheral cash ecosystems — especially in Southeast Asia. As we explored in my China Grey Zone series, Beijing enables these liquidity flows as a workaround to external pressure — using them to evade tariffs and sanctions. However, this same strategy seeds fragmentation and empowers peripheral actors, ultimately undermining the very sovereignty it seeks to protect

Scam centers in Myanmar, Cambodia, and Laos serve as offshore liquidity vents, recycling funds through cryptocurrency rails, informal money brokers, and online gambling channels. Chinese actors, including local officials and security services, extract rents and facilitate the expansion of these networks, often under the guise of “development” or “business diplomacy.”

These scam economies and gray financial nodes hollow sovereignty from within. The Chinese state becomes both participant and hostage: benefiting from offshore cash generation while losing consolidated oversight over the system. Beneath the narrative of strong central command lies an archipelago of liquidity escape routes that empower non-state actors, local elites, and transnational crime networks.

Ironically, Beijing has begun pushing to crack down on these scam centers, despite many being indirectly funded or facilitated by state-backed Belt and Road Initiative (BRI) infrastructure and investment projects. This reactive enforcement highlights the internal contradiction: the state depends on gray liquidity flows to sustain influence abroad, yet those same flows undermine its long-term strategic coherence. The result is a sovereignty that appears centralized but is riddled with silent fractures, primed for instability when crisis hits.