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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

#421

Post by jollybean »

lxgr wrote: post #301
periheli0n wrote: post #284

Earlier quoted context omitted.

What would keep some entity that has its SWIFT access revoked from switching to China's CIPS or even crypto? Would it be merely an inconvenience, requiring the change of a few processes, or would it create hard problems?

When people say "revoking somebody's SWIFT access", I think they really mean putting them on national or international sanction/embargo lists that prohibit them from doing any kind of business with them (in particular, sending payments in their name or for their benefit), rather than actually, technically removing their SWIFT network access. Since SWIFT is not the only, but certainly the largest financial/interbank m…

I don't believe this is accurate.

I don't think anyone would arbitrarily just ban all trade like that. And if that's what they did intend, that's what they would say and the consequences are much bigger.

It's kind of a 'de facto' ban however, in that, it's hard to pay people otherwise.

I'm sure a Swiss bank or two could immediately broker transactions 'by hand' though, that would be a pretty easy way around things.

That said, you could be right. If that's the case, I wish they would make it more clear.

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

#422

Post by dannyw »

rosndo wrote: post #199
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…

> 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…

In reality though if this happens and Europe / China doesn't like it (Europe literally needs Russia oil unless they want civil unrest with $300/barrel crude), compliance with US directives are not guaranteed.

The stick is real, it is very sharp and pointy; but it's a thin and targeted stick. Stab top many people with it, and it'll snap.

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

#423

Post by dannyw »

majormajor wrote: post #178
snovv_crash wrote: post #90

Earlier quoted context omitted.

Bit what if they didn't, and just changed some numbers in their database?

Other comments are making comparisons to asset bubbles or governmental money-printing, which is rather different than immediate bald-faced fraud on the part of a single actor. Do you really think it's that easy? That *nobody else involved in the system ever was like "wait, what if someone tries to defraud us?"? That there aren't various levels of checks and methods to prevent such easy, easy things? That, say, the FD…

Yeah, right.

Ask anyone in accounting in a large enough corporation how many millions of dollars go unaccounted each quarter.

Ask the Inspector General of the Defense Department how many trillions of dollars are fudged (answer: $2.6 trillion as of 2016).

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

#424

Post by jollybean »

Aside from SWIFT, we're not even talking about Nodstream 1 or other things.

This 'target the gov. and leaders not the people' is also a bit rubbish for 2 reasons:

1) The people are the country, they are not hugely separable. The people won't really feel the pain or 'see consequences' directly from SWIFT. It's a total abstraction. Even if their prices rise, the attribution will be lost.

2) Putin's approval post invasion is 69%. 5% of Russians think that Russia is responsible for the Ukrainian invasion. 50% believe that NATO is responsible. Just absorb that for a moment.

Despite some of the current protests that we see on the news (which are amplified in the Western press to the point of being a bit propagandistic), Russians are themselves complicit in what is going on, and at very minimum, things should be done to make a very clear populist signal to them.

a) Cancel all travel visas

b) Disallow all flights in/out of Russia to all friendly states.

c) Cancel a lot of consumer facing business: Starbucks, IKEA, iPhones and definitely entertainment, film, clothing brands, music apparel etc. Definitely cancel everything related to Football/Soccer. And ban all participation from any kid of international events. None of this 'Athletes from Russia technically no the Russian team' rubbish.

d) Send anyone on short-term business/study home. You can finish out the year, but your not coming back to Harvard next year - sorry - your Oligarch/Elite parents are complicit.

None of that will have dire consequences for anyone - but every single Russian will be hit with the message: you don't get nice cappuccinos when you're gleefully invading a neighbouring country. If you want nice shiny toys, get a new leader.

Putin is actually not invulnerable. His approval has been low over the last bit, he has people who want to replace him, the Oligarch and Big Business really do not like him, and the population could turn on him pretty quickly.

I believe part of the reason he was so physically distance from other members of his staff was not just COVID, but I suggest he's paranoid about a coup, which is after all the most common way for a Russian leader to go.

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

#425

Post by kasey_junk »

anonporridge wrote: post #405
joebob42 wrote: post #396

Earlier quoted context omitted.

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.

It's transferable debt. If I give Paul a loaf of bread and in exchange he writes "Paul owes you one" on a piece of paper, that's money. I can trade that with someone else for some good or service and we'll have to haggle over how much "one" favor from Paul is actually worth. The dollar is just "the US government owes you one". How much is "one" worth? That's for the market to decide, and largely depends on how much r…

Money has lots of properties and you seem to be struggling to understand 2 fundamental ones.

Money is a) fungible, 2 units of the same money are worth the same thing and b) general applicability. You can use money as a medium of exchange most places.

Brent crude futures contracts are fungible at the monthly contract value. I can literally swap 2 same month contracts with no change in count. I can’t buy coffee with them though (or even Brent crude oil without a lot of toil).

MasterCard debt is generally applicable. It’s spendable all over the world, but I can’t trade it for Amex debt without a conversion.

That makes money status contextual but not undefinable. Rubles are not usable where I live. That means they aren’t money here, I have to fx them, but they are money somewhere else, even places where the government says they are not, like Brighton Beach.

Long story short, you must have external validation of value for something to be money.

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

#426

Post by phs318u »

mvkel wrote: post #335
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?

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

Surely this can only be true if a blockchain based currency can replace fiat currency end-to-end. The moment any part of your economy is reliant on the exchange of (say) BTC back to fiat, all the attributes and constraints of fiat come back into play.

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

#427

Post by landemva »

lisper wrote: post #209
waterheater wrote: post #168

Earlier quoted context omitted.

Then you have fraud, likely leading to an economic crisis. Consider the 2007-2008 financial crisis. Abstractly, investors believed that homes had significant value until, one day, society realized the value didn't exist in reality but only "on paper." We know that investment bankers were hiding the problem until the proverbial lid blew. You might consider that our current financial paradigm has never been tried befor…

> We know, however, that they don't. We know no such thing. The only objective fact is that there have been fewer financial crises since the dollar went off the gold standard than before. Financial controls don't work perfectly , but having money tied to a commodity is fraught with its own difficulties. It's actually quite handy to have fine-grained control over the money supply that is not coupled to external physic…

' we have the option of controlling it to produce better outcomes '

Following that logic, every country can simply print fiat money until everyone is rich.

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

#428

Post by jrsj »

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…

It seems to me like all societies are trending towards low trust. Technology that can work in a low trust environment though can alleviate some of the pain that comes with that though.

Since cryptocurrency was already mentioned recent examples of that can be seen in Ukraine. The traditional financial system there has been disrupted; you can’t get cash out of an ATM. If you have cryptocurrency you can still transact. I think I saw something earlier where a journalist was able to get out of the country by using crypto to buy a used car.

Sometimes inefficiencies are still worth it, especially when dealing with worst case scenarios. Just-in-time manufacturing and global supply chains are very efficient, but when they are disrupted the cost is enormous. Winterizing the energy grid in Texas is expensive and inefficient/expensive, but if they don’t you are accepting that people will freeze in a severe winter storm.

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

#429

Post by remram »

chii wrote: post #414
lxgr wrote: post #331

Earlier quoted context omitted.

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 confor…

> how a central bank report can even be "false" they issued money to institutions or individuals, but pretended that they didn't in the reports, thus creating untraceable money without oversight.

How do they "issue money" if they don't report that transaction? Do you mean cash?

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

#430

Post by landemva »

majormajor wrote: post #178
snovv_crash wrote: post #90

Earlier quoted context omitted.

Bit what if they didn't, and just changed some numbers in their database?

Other comments are making comparisons to asset bubbles or governmental money-printing, which is rather different than immediate bald-faced fraud on the part of a single actor. Do you really think it's that easy? That *nobody else involved in the system ever was like "wait, what if someone tries to defraud us?"? That there aren't various levels of checks and methods to prevent such easy, easy things? That, say, the FD…

Actually the regulators encouraged backdated deposits to allow IndyMac to appear solvent.

https://abcnews.go.com/Business/story?id=6514493 "The impact of Western Director Dochow's approval to record the capital infusion in the quarter ending March 31, was that IndyMac was able to maintain its 'well-capitalized' status," ...

https://www.cnbc.com/2011/11/23/financial-fingerpointing-tur... ' Even if regulators are involved in wrongdoing, they have some immunity. Internal disciplinary measures are rarely taken against regulators who perform badly in their jobs, say government officials. '

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