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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

#321

Post by anonporridge »

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…

tl;dr, what makes electronic USD "real" is a system of consensus like bitcoin, except it's a node of 1 (the US Fed) with a handful of spokes (banks with Fed accounts) for scaling off that base node.

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

#322

Post by worik »

anonporridge wrote: post #313
lxgr wrote: post #296

Earlier quoted context omitted.

> How does the system guarantee that nobody's creating money without notifying everyone? Through a series of regulations regarding minimum liquidity/capital [1] and/or reserve [2] requirements. > Furthermore, does the system guarantee that the central banks of each country are correctly adjusting their books in consequence? By requiring them to periodically report on their assets and liabilities, checking for complia…

So it's all trust based? We have to trust that all the governments of the world, who pinky promised to follow the rules, aren't secretly cheating internally and reporting false numbers to everyone else?

Yes.

Money means nothing without trust.

I do not think we can have civilisation without trust

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

#323

Post by jorblumesea »

legalcorrection wrote: post #147
jorblumesea wrote: post #129

Earlier quoted context omitted.

As opposed to random commenters on HN who are likely SWE and not experts in finance or geopolitics? I hate this trend of "well he's an expert so he might be wrong". Okay, sure, we are all human and make mistakes, but, he's also an expert and you don't become an expert by being wrong all the time. Not sure how many people here are qualified to comment on these events instead of him.

> I hate this trend of "well he's an expert so he might be wrong". Trotting out an expert who you agree with, to end discussion, is just as bad. You can find reasonable experts on all sides of issues. It's almost always used as a rhetorical technique to shut down debate.

Trotting out an expert is far better than just random comments from uninformed people. I'd just rather say "I have this expert I agree with" vs "I'm a SWE that has no background in this and my opinions are somehow weighted the same" or "this expert is wrong despite the fact that I have no understanding of this subject"

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

#324

Post by anonporridge »

worik wrote: post #322
anonporridge wrote: post #313

Earlier quoted context omitted.

So it's all trust based? We have to trust that all the governments of the world, who pinky promised to follow the rules, aren't secretly cheating internally and reporting false numbers to everyone else?

Yes. Money means nothing without trust. I do not think we can have civilisation without trust

"The root problem with conventional currency is all the trust that's required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust." -- Satoshi Nakamoto

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

#325

Post by tomp »

JumpCrisscross wrote: post #311
rosndo wrote: post #199

Earlier quoted context omitted.

> 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 asse…

> US has the power to force any bank that wants to transact in USD to freeze all Russian assets no matter the currency Ish. In reality, this power is constrained by our courts. Which is why we have the privilege. A foreign person wrongly frozen can take on the U.S. government in court and win.

Isn't it in actual reality just a matter of passing the right set of laws?

"I deem it legal to freeze assets of terrorists."

"I now deem you a terrorist."

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

#327

Post by mediumsmart »

tobylane wrote: post #116
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?

That applies to a lot of known future sanctions. Eg clearly Germany would like to not need any gas pipeline, and Russia will aim to build more pipelines to China before German governments can say no more Russian gas. However, could excluding them from Swift at some point between 2014 and this week be justified?

Absolutely, the German Banks can send trucks to collect their loans in Rubles. No biggie.

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

#328

Post by from »

s_dev wrote: post #80
nimbius wrote: post #44

quite a few commenters have pointed out SWIFT as a hand of soft power and i think its important to understand the twitter post doesnt mention an important fact: SWIFT was created in order that Europe may resist Kissingers increasingly capricious hand of soft power as it emerged as a lead sap in an increasingly arbitrary US foreign policy. 40 years ago the US had become effectively drunk on soft-power moves against st…

Nah -- Bill Browder seems to be a expert on this exact topic. He's saying to pull Russia from Swift. His experience suggests he is intimately familiar with the financial world and the consequences. He's the genesis of the Magnitsky Act -- the one thing that actually scares Putin. I know this because Putin even said if Russia was removed from Swift he would consider it an act of war. https://twitter.com/Billbrowder/st…

If the Magnitsky Act actually worked then we would expect changes in the behavior of the people it sanctioned to get off the list. Looking at https://en.wikipedia.org/wiki/Magnitsky_Act#Individuals_affe..., it doesn't seem too effective. Dan Gertler is still a billionaire even though he's on the list. In practice I suspect OFAC designations just mean the designated individuals need to pay some lawyers a fee to get their assets held in the names of nominees.

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

#329

Post by beambot »

nradov wrote: post #251
beambot wrote: post #188

Earlier quoted context omitted.

> 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?

Decentralized consensus & trust doesn't rely on banks and all the associated cost, complexity, obscurity, and gatekeeping that comes with them. With crypto: "Banks" can't unilaterally or fraudulently print more money, settlement is much faster & public / atomic, APIs are through transparent smart contracts rather than semi-structured SWIFT messages, and no need to rely on trust that funds are real compared to (say) Eurodollar derivatives -- i.e. many of the legacy hacks that others are talking about in this thread.

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

#330

Post by PTcartelsLOL »

johannes1234321 wrote: post #85
pmontra wrote: post #45

Earlier quoted context omitted.

Which could be revoked by printing new money with a new design and giving them only to the friendly parties in replacement of the old ones. It's routinely done (Euro is on its second design) and old banknotes and coins are no more valid after some years (the first series of Euros doesn't have an end of life yet.)

not only are first series euros still valid, but you can still exchange pre-Euro currencies for the original rate. The purpose of the new series is just to keep up with counterfeit money, to include newer security measures. But yes, countries in the world have revoked currencies from time to time.

No, you can't. They were only valid for 20 years, and 20 years have passed since 2002.
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