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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

#391

Post by pgwhalen »

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, everything meaningful in society is trust based.

I really hope crypto maximalists have made it this deep into the thread.

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

#392

Post by Suncho »

JacobThreeThree wrote: post #277
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…

>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. How does the system guarantee that nobody's creating money without notifying everyone? Furthermore, does the system guarantee that the central banks of each country are correctly adjusting their books in…

> How does the system guarantee that nobody's creating money without notifying everyone?

This is a comment that's not related to SWIFT in particular.

Every asset (including money) is generally someone else's liability. The money that we hold as an asset is the liability of a bank. Anyone can issue their own liabilities, but you can't create money that's a liability of someone else. For example, I can't go to my bank and tell them I have a million dollars more in my deposit account than I actually do. They're keeping track on their end.

Similarly, a bank can't pretend that it has more reserve deposits at the Fed than it really does. The Fed keeps track of everybody's reserve accounts on their end.

> Furthermore, does the system guarantee that the central banks of each country are correctly adjusting their books in consequence?

This isn't an issue. The books of central banks don't need to adjust when other banks issue money (i.e deposits).

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

#393

Post by jonp888 »

supernova87a wrote: post #283

I have always wondered, what combination of manual vs. automatic processes are happening when one makes a bank wire (actual wire transfers, not ACH)? Because whenever I have done wires, in addition to the bank/IBAN/account numbers, there are all these manual fields like "for further credit to" etc. that are clearly having to be interpreted by someone. And very often errors come up and the funds are held or in limbo o…

In Europe bank transfers are free and the standard way of transferring money. Cheques are pretty much extinct.

If American banks charge for them it's most likely because they can. It's standard practice in retail banking to offer commonly used things cheaply and then earn back the cost by charging loads for anything unusual.

As for how it actually works, in the European Bank I worked at we debited the account and then put the transfer in a batch file and sent it to the central bank which processed them every few hours. If the transaction failed for unknown reasons, someone would, I think manually review it.

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

#394

Post by kayamon »

Hamuko wrote: post #205
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.

Which is not just a number on a computer, right?

That's right. Bitcoin is represented via 10-minute sequential hashed blocks. You can't forge that currency without re-doing 13 years of computing work.

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

#395

Post by Suncho »

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's two numbers in computers. It's a number in the computer of the bank that issued the money, and it's a corresponding number in the computer of whoever is holding that money as an asset.

> 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."

It's not possible for a Russian bank to pretend they're holding more USD assets than they really are. The issuing bank knows how much USD is in Russian bank's deposit account. The Russian bank can issue its own USD liabilities (i.e. deposits) which are IOUs for the USD reserves that the bank holds on the asset side of its balance sheet. If the bank issues too many USD liabilities, they risk suffering a bank run that drains their USD reserves and puts them out of business.

> So I guess USD needs to be recognized by the US somehow?

Not exactly. It's possible to have a USD-denominated deposit account at a bank that h deposits at banks in the US. Most of the USD-denominated instruments in the world are not directly recognized by the US. But the international monetary system is hierarchical. Every USD instrument is an IOU for another USD instrument. If you follow the chain of IOUs, eventually, you'll get to the Fed.

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

#396

Post by joebob42 »

anonporridge wrote: post #363
kasey_junk wrote: post #357

Earlier quoted context omitted.

Gold and Silver are not “money”. Money is almost by definition based on authority mandated value. It’s true that lots of money exists outside of government decree but equating any commodity to be money redefines the term.

That's a dumb take. Money is whatever thing human society decides to collectively value in order to more easily trade goods and services across time and space. Money has been and continues to be many things, from government decreed currencies, to gold and silver, to cigarettes in prisons, to sacks of salt paid to Roman soldiers (etymology of 'salary'), to the colloquial "I owe you one". Money is just debt and favors…

I think not quite just debt and favors. In my mind at least the key differentiator is that with money, I can take some money from Paul for some good or service, and expect to be able to get a similarly valuable good or service from basically anyone for that same money.

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

#397

Post by s1artibartfast »

myko wrote: post #316
diognesofsinope wrote: post #59

Earlier quoted context omitted.

They are signaling. Push came to shove and the unfortunate reality is that Ukraine isn't that important to most countries and the risk of a greater war is worse. The lesson here is that every country should learn to defend itself.

I think the lesson is Ukraine should have joined NATO years ago and countries should only elect leaders who respect the alliance and want to keep it strong.

That would have just moved the timeline up. Ukraine is in a shitty position. Russia has always had a "red line" of conflict if Ukraine joins NATO. NATO has always known this.

Russia's neighbors want in to be protected from war, but there is no way in without starting a war.

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

#398

Post by s1artibartfast »

myko wrote: post #318
lesuorac wrote: post #64

Earlier quoted context omitted.

That's how war (hard diplomacy) works as well. World leaders don't get into an octagon and duke it out to see who controls what territory. They send normal people (soldiers) to go acquire it for them. Occasionally the soldiers capture/kill a world leader but usually they reach some kind of (conditional/unconditional) agreement before that point. But the soldiers are not world leaders themselves anyways.

Zelensky and Poroshenko are carrying rifles into battle as we are posting comments on this thread.

I find that hard to believe. do you have a reference?

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

#399

Post by anonymoushn »

MereInterest wrote: post #389
mvkel wrote: post #335

Earlier quoted context omitted.

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

Any time a friend or relatives asks me to explain what cryptocurrency is, the trust aspect must be front and center, axiomatic to the entire ecosystem. There is not a single thing in the implementation that makes sense without first assuming a lack of trust amongst every single party. This is also why cryptocurrencies can never be made efficient, and will be a blight for as long as they exist. They are the logical ex…

many PoS distributed slowish databases are currently deployed and process comparable transaction volume to credit card networks while emitting less carbon.
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