Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

A quick breakdown of what SWIFT is and why it matters

twitter.com

Post reply on HN
Print view View original

191–200 of 496 posts

Re: A quick breakdown of what SWIFT is and why it matters

#191

Post by lokar »

ajross wrote: post #124
MatteoFrigo wrote: post #35

Earlier quoted context omitted.

> I often wonder how money is stored. The Bank of England published a summary of how modern banks work. See https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/m... > It can't be just a number on a computer in a bank, right? It can and it is, see the BOE paper. > So I guess USD needs to be recognized by the US somehow? This is a complicated question that will start a flamewar, but basically, any bank in the wo…

> This is a complicated question that will start a flamewar, but basically, any bank in the world can create dollars out of thin air given adequate collateral. Read about "Eurodollars". This is true, but it's actually sort of a specious point. What a eurodollar deposit "really" is, is just a short contract. Your European bank takes your exchange and promises to give you back dollars when you ask for them. That they m…

Exactly, they don't give you dollars, they give you a dollar denominated liability.

Re: A quick breakdown of what SWIFT is and why it matters

#192

Post by sudosysgen »

krzyk wrote: post #163
KrishnaShripad wrote: post #67

Earlier quoted context omitted.

> They said it's not intended to stop Russia, but to inflict pain on the citizens, so that they citizens will turn against leadership. Which country has it ever worked out on? Cuba? Venezuela? North Korea? None of them have turned on their dictators. Rather, they are living life in misery. What is worse is they have been not just cut off monetarily from the rest of the World, the dictators have made sure to censor al…

Romania, Libya? Tzar Russia?

Libya didn't work. NATO had to do it militarily. As for Romania, it had nothing to do with sanctions, and that's the same for the Tsars.

Re: A quick breakdown of what SWIFT is and why it matters

#193

Post by lxgr »

thomasahle wrote: post #181
lxgr wrote: post #142

Earlier quoted context omitted.

> when bank A transfers to bank B, does bank B check with the Feds that the money from bank A is "real"? Yes, unless the banks have mutual accounts with each other that they can use to settle instead. So, if bank B is accepting to be owed money by bank A for any transfer from A to B, they don't need to settle – but there's practical limits to that, imposed by both risk and regulatory concerns. Eventually, they'll nee…

Thanks for clearing this up for me! > unless the banks have mutual accounts with each other that they can use to settle instead. So this is just based on trust that the other bank will keep a truthful score of the transfer, and there won't be a dispute at settlement time? If the banks are often willing to trade with each other "on trust alone" like that, I suppose that shows why the Feds can't always directly block d…

> So this is just based on trust that the other bank will keep a truthful score of the transfer, and there won't be a dispute at settlement time?

Exactly: Either there is trust (and external settlement is not required), or there isn't, in which case banks will usually only credit incoming transfers to their customers once the underlying funds have settled.

Practically, trust is a spectrum, and banks might only settle once the outstanding balance in either direction has become too large (that's then called "netting").

> If the banks are often willing to trade with each other "on trust alone" like that

Bank balances are ultimately only be useful to their accountholders if they can effect some payment with them. There is therefore also a spectrum of fungibility of USD balances.

If you think about it, what makes USD useful is the fact that they can be used to pay for imports from the largest economy in the world. Only very few US companies would be willing to trade with you when being paid in USD balances at some foreign bank that they can't, as one significant example, pay their taxes with.

Re: A quick breakdown of what SWIFT is and why it matters

#194

Post by dmingod666 »

mupuff1234 wrote: post #29
chiefalchemist wrote: post #18

IDK. In an interconnected global economy my sanction of you hurts you, but it hurts me as well. For example, the higher price of oil is good for Russia and OPEC, but not the rest of us.So where is the pain? Certainly there are things that Russia has that the West needs. In addition, if Russians are generally used to less - and the West isn't - then again where is the pain? After two years of pandemic are most America…

High price of oil is good for Russia only if they have buyers. And yes, in the short term it will hurt us but in the longer term you are disarming the influence of a bad actor with the added benefit of incentivizing cleaner energy and perhaps more efficient means of transportation.

'Disarming the influence of a bad actor'

Russia is going nowhere. They are not NK. Consequences are never one sided, in a conflict, the other side gets a vote too.

Re: A quick breakdown of what SWIFT is and why it matters

#195

Post by mysecretaccount »

KrishnaShripad wrote: post #67
daenz wrote: post #49

Earlier quoted context omitted.

I was watching a mainstream news report (I'll try to find it and edit my comment) where the host and the guest were talking about the impact of economic sanctions. They said it's not intended to stop Russia, but to inflict pain on the citizens, so that they citizens will turn against leadership. In that moment, it really clicked for me how much normal people are pawns to be used in much larger games. And there appare…

> They said it's not intended to stop Russia, but to inflict pain on the citizens, so that they citizens will turn against leadership. Which country has it ever worked out on? Cuba? Venezuela? North Korea? None of them have turned on their dictators. Rather, they are living life in misery. What is worse is they have been not just cut off monetarily from the rest of the World, the dictators have made sure to censor al…

> [Cuba citizens] are living life in misery.

Cuba has higher life expectancy and a lower infant mortality rate than the USA. I think it is a mistake to lump it in with Venezuela or North Korea.

Re: A quick breakdown of what SWIFT is and why it matters

#196

Post by krzyk »

imwillofficial wrote: post #131
aluminum96 wrote: post #93

Earlier quoted context omitted.

> in 2022 sanctions are ... effectively meaningless as most capable, observant countries have managed to sidestep in part or in whole the once dominant US hegemony This is only true to the extent that the US unilaterally imposes sanctions. The proposed sanctions involving SWIFT are multilateral, with the support of the entire EU. That's around double the economic power of the US alone, and roughly half of the entire…

Yeah, China isn’t going to side with the US/EU, and the rest of the Asian countries are too small to matter, including Japan/Korea. In fact, China has stepped up their efforts to aid Russia. The next few weeks will be history in the making. Pay attention.

India are far from small, bu they did not condemn Russia.

Re: A quick breakdown of what SWIFT is and why it matters

#197

Post by tony_cannistra »

lxgr wrote: post #126
TekMol wrote: post #26

I often wonder how money is stored. It can't be just a number on a computer in a bank, right? Otherwise some Russian bank could just increase that number to whatever they like. And say "Look, we own 100 Trillion USD. Now let's go shopping.". So I guess USD needs to be recognized by the US somehow? Could the US simply "void" all USD that are owned by Russia?

> It can't be just a number on a computer in a bank, right? It really is, but to answer your second question, it's important to consider *which* bank. There's reserves (i.e. balances of banks at the Federal Reserve) and bank deposits (which really are just numbers in banks' databases). Having an account at the former is effectively what makes numbers in the database of the latter "real USD". > Otherwise some Russian…

I am astounded at how much I just learned about banking from you -- Thank you!

Re: A quick breakdown of what SWIFT is and why it matters

#198

Post by jancsika »

> A cutoff from SWIFT may also have longer-term second-order effects on Bitcoin and non-fiat currencies.

And remember that Bitcoin has a fascinating property here-- the more demand there is for transactions on it, the better it gets at scaling for something approaching SWIFT level of transactions.

Oh wait I'm thinking of Bittorrent's scaling wrt popular torrents. Yeah, Bitcoin's ability to scale is complete shit.

Re: A quick breakdown of what SWIFT is and why it matters

#199

Post by rosndo »

lxgr wrote: post #126
TekMol wrote: post #26

I often wonder how money is stored. It can't be just a number on a computer in a bank, right? Otherwise some Russian bank could just increase that number to whatever they like. And say "Look, we own 100 Trillion USD. Now let's go shopping.". So I guess USD needs to be recognized by the US somehow? Could the US simply "void" all USD that are owned by Russia?

> It can't be just a number on a computer in a bank, right? It really is, but to answer your second question, it's important to consider *which* bank. There's reserves (i.e. balances of banks at the Federal Reserve) and bank deposits (which really are just numbers in banks' databases). Having an account at the former is effectively what makes numbers in the database of the latter "real USD". > Otherwise some Russian…

> Indirectly, yes: They can force every bank holding USD balances for embargoed beneficiaries to freeze these assets. Failing to comply could, in the absolute worst case, lead to that bank's Fed accounts being frozen as well (which would take away its ability to settle in USD with other banks).

They could also go much further. US has the power to force any bank that wants to transact in USD to freeze all Russian assets no matter the currency.

This is a very big stick.

Re: A quick breakdown of what SWIFT is and why it matters

#200

Post by KarlKemp »

buu700 wrote: post #99
andrepd wrote: post #92

Earlier quoted context omitted.

> Of course, they probably wouldn't be in this position if they hadn't taken energy strategy advice from Greta Thunberg, but that's neither here nor there. What the fuck? I'm pretty positive that the energy strategy of major western powers was not radically revamped in two years on the advice of a teenager. If anything, they're in this position because they pursued an opposite strategy to what ecologists advocate: re…

I think what they were referring to was Germany prematurely decommissioning nuclear plants only to start replacing them with coal and (more importantly) Nord Stream 2, which I never understood either. I can't comment on whether Greta Thunberg had anything to do with that, but I do see in a recent article that she appears to be anti-nuclear: https://www.theguardian.com/world/2021/dec/21/eu-in-row-over...

Replacing them with coal would have been a good idea, at least as far as Russia is concerned, since it’s a local source of energy. In reality it was, indeed, natural gas and renewables.

Bringing Thunberg into this discussion serves no purpose except making conservatives giggle because they love hating her. She had nothing to with the decision, and being anti-nuclear isn’t what she’s known for.

Northstream 2 was, indeed, a terrible idea. But it never became operational and therefore does not affect the current situation.

Post reply on HN