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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

#331

Post by lxgr »

adolph wrote: post #317
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…

It seems like the linked regulation is not yet implemented. Further, your response to a question about a guarantee is regulation and reports? How does anyone know the reports of another central bank are true? When a central bank fakes numbers, what are the consequences, if any, and who adjudicates them? Basel III was agreed upon by the members of the Basel Committee on Banking Supervision in November 2010, and was sc…

Good point – I should have linked to the general concept instead: https://en.wikipedia.org/wiki/Basel_Accords

> Further, your response to a question about a guarantee is regulation and reports? How does anyone know the reports of another central bank are true? When a central bank fakes numbers, what are the consequences, if any, and who adjudicates them?

Money, especially fiat money, is a social construct. The conformance with and violation of it is therefore within the domains of law and politics.

> How does anyone know the reports of another central bank are true?

Monetary theory is not my expertise, but I'm curious how a central bank report can even be "false" (assuming it is issuing fiat currency and isn't falsely claiming to be backed by foreign reserves or commodities, for example).

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

#332

Post by mi_lk »

sealthedeal wrote: post #257

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 re…

what are the best books/resources to read about the system?

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

#333

Post by ausbah »

rglover wrote: post #292
ChildOfChaos wrote: post #250

So bitcoin is going to go up? Asking for a friend.

It's very likely. It would be an effortless switch to Bitcoin for Russia and give them access to a currency/network completely invulnerable to nation state controls. Blocking SWIFT for Russia would be a very, very, very stupid idea because it would precipitate the collapse of the U.S. Dollar. Which, I'd bet, is intentional because the central banks want to push out CBDCs they control and populations are primed to sup…

and Russia can switch it's entire economy to be largely reliant on Bitcoin at the drop of a hat?

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

#334

Post by lmm »

tomp wrote: post #325
JumpCrisscross wrote: post #311

Earlier quoted context omitted.

> 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."

You could equally say that in actual reality it's a matter of having enough men with guns. Occasionally the abstractions break down and that's where it all bottoms out.

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

#335

Post by mvkel »

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?

Yep! This is the fundamental "disruption" blockchain tech introduced. It doesn't require trust.

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

#336

Post by mvkel »

sealthedeal wrote: post #257

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 re…

Do you see blockchain tech eventually replacing these trusted systems with a trustless one?

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

#338

Post by murphyslab »

june_twenty wrote: post #337

The way people write things on Twitter amuses me. Is this person a SWIFT expert or did they just google all this stuff to be able to tweet about it? Plus.. I can't read it all because Twitter throws a sign up modal.

He's an "investor/entrepreneur" FWIW.

To read, you can always use ThreadReader. Just pop the Tweet's URL in there:

https://threadreaderapp.com/thread/1496861068945154056.html

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

#339

Post by caylus »

nonfamous wrote: post #245
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?

Some good answers above provide more detail here, but ultimately yes: money, for the most part, really just is a number on a computer. Here’s a good example: when you borrow $500,000 from the bank, the bank’s funds don’t go down by $500,000. The bank just creates that money out of thin air, by adding to the number in your bank balance. Eventually that number goes down as you repay the loan, so it all washes out in th…

> when you borrow $500,000 from the bank, the bank’s funds don’t go down by $500,000

While technically true, this is a bit misleading, because if you actually /do/ anything with the $500,000, that does in fact cause the bank's funds (i.e. reserves) to go down.

If you withdraw it in cash, then the bank will have to give you some of the Federal Reserve Notes it has in its vault, and when they request more from the Federal Reserve, their account there will be debited $500,000.

Or if you send it to someone at a different bank, then to settle the transaction your bank's balance at the Federal Reserve (or another intermediary bank) will go down by $500,000, and the other bank's will go up. This tends to average out if both banks are receiving deposits and making loans at equal rates, but if they become imbalanced the bank is at risk of its reserves falling below the requirements, which it must remedy or risk bankruptcy.

You're right that low interest rates make it easier for banks to create money, though, because one option a bank has to remedy low reserves is to borrow them from another bank at an interest rate that the Federal Reserve can influence.

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

#340

Post by krick »

june_twenty wrote: post #337

The way people write things on Twitter amuses me. Is this person a SWIFT expert or did they just google all this stuff to be able to tweet about it? Plus.. I can't read it all because Twitter throws a sign up modal.

There isn't anything really in this "explanation" that cannot be googled within seconds much less that would require him to be an expert. For me it explains nothing. I don't know, maybe it is a little enlightening for a person that never heard of SWIFT before, that didn't know it's "something related to international payments" and now he does. But I'm not sure this qualifies as an explanation.
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