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A quick breakdown of what SWIFT is and why it matters

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

#251

Post by nradov »

beambot wrote: post #188
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? And yet people question the utility of a decentralized, trustless, public ledger -- ie. blockchain.

What is the utility? Sure it makes money laundering and buying illegal goods slightly easier than dealing in cash but otherwise what's the point?

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

#252

Post by mcguire »

daenz wrote: post #65
m_ke wrote: post #54

Earlier quoted context omitted.

With all due respect Russian people are the only ones who can stop Putin.

That's my point. The ruling class is free to exploit, manipulate, and abuse the working class, up until they're really needed for something important, like bailing out banks, or pressuring another country's government. I guarantee we all share more in common with the working class from different cultures than we do with our own ruling class.

I would submit that most of the commenters in this forum have more to do with the ruling class than with the working class. (The median personal income in the US is about $36,000/year. (https://fred.stlouisfed.org/series/MEPAINUSA672N))

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

#253

Post by Barrin92 »

gruez wrote: post #7

>Russia has also been building an in-house system since 2014—the last time SWIFT cutoff was threatened—which may mean they are able to temper some of the impact a cutoff would have on its economy. If they're building a replacement, doesn't that also mean we should use "cut off SWIFT" now, rather than later when it'll be ineffective?

Another interpretation is that keeping them on SWIFT at least gives you some leverage, while forcing them out of it only accelerates other payment infrastructure, which essentially will play right into Russia's hands anyway.

SWIFT sanctions are kind of blunt given that we're now living in a world where any major power can write some software. And in this case both China and India offer alternatives.

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

#254

Post by shuntress »

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?

Yes.

It's a distributed shared ledger.

If this hypothetical Russian bank attempts to add fraud to the ledger, it will cause a fork.

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

#255

Post by mcguire »

Aunche wrote: post #146
ivraatiems wrote: post #78

Earlier quoted context omitted.

I'm sorry that this is the case, but, I'm pretty sure that's the idea. At this point, your government is not acting with anyone's best interest in mind, including that of its citizens. It's up to the rest of the world to make it clear what the consequences are for that, in the hopes that if your leaders don't change their mind on their own, you'll do it for them.

That's the propaganda used to justify sanctions, but historically, no government has been overthrown due to sanctions. The sanctioned country can just use the sanction as an example of hegemony, which isn't exactly inaccurate. What sanctions do accomplish is that they give you an avenue for more aggressive intervention. An example of this is America's sanctions against Imperial Japan before WWII.

And the alternatives to sanctions are?

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

#256

Post by andruby »

bally0241 wrote: post #230
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…

It's amazing to watch people who have never really thought about this before realize the entire banking system is built upon a handful of centralized, permissioned databases which can pretty much be turned on/off at will for certain parties by the central banks. What is even more amazing is watching these same people (no necessarily you OP, but prevailing opinion on HN...) then go on an argue that a permission-less d…

Honestly curious. What is the dissonance that you see there?

Digital fiat currency is indeed bank databases. Similarly, stock markets and stock ownership are also stored in permissioned databases. Both are highly regulated and enforced by law. For people in countries with a high level of rule-of-law, and a stable financial system, I’d argue that this works reasonably well.

I also think that blockchain and other crypto currencies can be very useful. Especially for people in countries where rule-of-law is not as important and corruption is high.

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

#257

Post by sealthedeal »

CEO and co-founder of Routefusion here, a cross-border bank to bank payment API. We use the SWIFT network regularly. I can 100% confirm that all money in the world is just literally numbers, and it is balanced by the different federal reserve systems around the world to ensure no one can "create" money without notifying everyone.

I guess if I was super cool I would do an AMA because this is the only thread that is really my time to shine hahaha.

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

#258

Post by mohanmcgeek »

TeeWEE wrote: post #227
lxgr wrote: post #126

Earlier quoted context omitted.

> 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…

So reading this: Banks are basically a necessary "evil" to make the current money system work. When I read how banks works, their technology, and how money works in general.. It makes me think: Is this really the way we want it to work. I'm not sure if crypto is currently ready. But one BIG reason for it to succeed, is that the current system is just old... We have all these fintech startups improving money flow, and…

> Is this really the way we want it to work

Yes. This is not a technology problem. This is how banks have been working for the last 400 years.

You can't get rid of banks because banks are what create the money. The crypto people have a terrible understanding of what money is.

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

#259

Post by mcguire »

kgeist wrote: post #69
setheron wrote: post #63

Honest question: are sanctions that affect normal citizens OK if it's through SWIFT? In my mind that would cause the populace to be more frustrated with Putin for what he's done.

Putin will simply accuse the West of trying to make lives of Russians more miserable (technically it wasn't Putin who cut Russia from SWIFT) and many people will believe him, considering that thanks to fake news on state TV the majority believe the crisis was provoked by NATO. It won't work.

On the other hand, it will damage the Russian economy, which will in turn damage the Russian ability to field military forces.
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