"Please don't complain about tangential annoyances—things like article or website formats, name collisions, or back-button breakage. They're too common to be interesting."
1. Russia has been building up gold reserves, not crypo reserves
2. It's actually much harder than convincing 51% of miners that Russia is bad. You'll need to get them to agree on a list of addresses to freeze/sanction. Given that bitcoin addresses are pseudonymous, I'd imagine on agreeing on such a list would be politically impossible. Not to mention, how such action would affect trust in the network and the value of bitcoin
There's plenty of services which map Bitcoin addresses to real-world entities, e.g. Chainalysis Reactor, so coming up with a list of addresses to freeze/sanction would be the easy part.
>coming up with a list of addresses to freeze/sanction would be the easy part.
Coming up with a list of suspects is easy, convincing others that they're totally guilty is the hard part. I doubt miners would want a company like Chainalysis to be judge, jury and executioner of the bitcoin network.
I think, if the SWIFT ban really was "on the table", they would be making the case for China's own CIPS/CBCD system, if Russia decided to opt for such service as an alternative.
The NSA targeting SWIFT is interesting because it's difficult to legally justify if one (or especially both) parties are US citizens. But spying on CIPS is exactly what the NSA is supposed to be doing. It's unlikely they are not.
>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?
I'm way too far away from power on anything like this so I might be terribly wrong, but I imagine that cutting off SWIFT might convince other countries doing bad things to consider adhering to Russia's system, if they see the West willing to cut them off as well. You then get fragmentation and SWIFT losing some of its "soft power".
Russia already uses multiple alternative settlement systems with China, Iran, and few other buddies like Norko, and Belarus.
> You then get fragmentation and SWIFT losing some of its "soft power".
This already lost any power it had in 2014, because the threat of disconnection was wasted.
An honestly, EU lost its face now to talk "soft power." Every foreign head of state going to meet EU bureaucrats will now look at them, and think "can I rely on these people who threw out every treaty for a want of sleeping without a blanket?"
It's still an effective sanction because the Russian alternative is a half baked approach. It can only handle a fraction of the daily required transactions, only 40% of Russian banks are signed up to use it and it can only process payments during office hours.
To be fair, it's not only heating. It's power plants and gas to keep many factories working. Think about ovens of all sorts and all industrial processes that need a lot of electricity. But yes, it's the n-th loss of face of EU. It's not much about EU bureaucrats but about EU head of states, prime ministers, etc. which ultimately decide what bureaucrats do. On the other side of the ocean, if the USA let Putin go too far they risk losing part of their empire [1] which is always bad for business.
I'm not satisfied at all with Europe response so far, but i might be missing something here.
> can I rely on these people who threw out every treaty for a want of sleeping without a blanket?
Why isn't the US sending troops? Because the risk of escalation and nukes are unacceptable. In case you forgot, Europe also has nuclear powers and the risk of escalation is higher if the EU as an organization openly acts on more then soft power.
And as far as i know, only the US and the UK are ignoring a treaty to offer security to Ukraine.
Again, I'm not satisfied with the response so far, but what exactly are you suggesting so that EU bureaucrats don't lose their credibility?
> Because the risk of escalation and nukes are unacceptable.
He can lob a nuke right now, but he knows he will lose against the US.
He will retreat to avoid an even bigger defeat.
Thugs I fought in my teenage years, even when they brought a knife to the fight, when they are afraid of getting KOed, and humiliated in front of their peers, they wrap up, and leave.
They don't want to get beaten up, risk humiliation, and potentially committing murder at the same time.
Similarly, US can give Russian state 2 choices, a defeat with orderly surrender, or end like Yugoslavia, but 10 times worse.
> 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?
The replacement is already functional.
In fact, Russia is not the only one having built a replacement to protect against the risk that SWIFT would be sanctioned: Europe has done it too with Instex: https://instex-europe.com/about-us/
SWIFT is a private company; those sanctions make it less competitive, and it is hard to play whack-a-mole with a worldwide market.
SWIFT, to be fair, is very convenient because of its standards and high connectivity. But if SWIFT was sanctioned today, banks can use literally any mechanism to route funds, from SPFS to email. What matters is the recursive existence of accounts held at banks that have accounts held at banks.
I might be wrong but both of them aren't an equivalent to Swift. Rupay seems to be a card network like Visa and UPI builts on top of IMPS which might be considered an alternative, however IMPS is limited to financial institutions of one country and one currency.
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?
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.
SWIFT is kind of like Facebook. It has the benefit of “everyone” already using it. So even if you make your own Facebook it won’t have the same functionality as Facebook and it’s very unlikely everyone from Facebook will be motivated enough to make an account on your platform, too.
Interestingly SWIFT was used to effectively depose a Head of State already, specifically Pope Emeritus Benedict XVI. The Vatican's Bank was banned from the system and allowed back on after Benedict's resignation.
The lesson was not lost on Russia or China and they have been building an alternative system called BRICS.
Edit: Here's a contemporary source[1] from a "reputable" newspaper. It doesn't mention SWIFT by name but that's what it was. There were other "reputable" sources covering the story more explicitly back in 2013 as well, but web search's extreme recency bias leaves me unable to find them. Perhaps visit your local university library and they can help you search the periodicals.
The only reference I could find about that is an obscure Italian blog with the comment section filled with absurd conspiracy theories. Do you have some credible sources?
The timing would imply that Benedict XVI resigned (at least in part) due to the scandal involving blackmail of homosexual members of the church. The wiki page on the resignation doesn't go into that at all, but does link to the scandal in the "See Also" section.
> On 17 December 2012, the Pope received a report on "Vatican lobbies" ... . The same day, the Pope reportedly decided to resign, a decision he made public in February 2013
It's possible that multiple factors added up to make the job too overwhelming for one man of his age, but the "vatileaks" scandal appears to be far more significant in coverage from what I can see.
IDK. In an interconnected global economy my sanction of you hurts you, but it hurts me as well. For example, the higher price of oil is good for Russia and OPEC, but not the rest of us.So where is the pain?
Certainly there are things that Russia has that the West needs. In addition, if Russians are generally used to less - and the West isn't - then again where is the pain? After two years of pandemic are most Americans up for this? Most importantly, how can this not influence the 2024 election?
Finally, I listened to (most of) Biden's speech yesterday and I was stunned by the irony. Per invasion Putin was effectively saying "Russia can't trust The West. They're out to get us" and Biden follows that with "Lookout Vlad...we're gonna put a hurting on Russia." Doesn't this validate Putin's narrative?
I understand...it's complicated. But it's also 2022, not 1952.
High price of oil is good for Russia only if they have buyers.
And yes, in the short term it will hurt us but in the longer term you are disarming the influence of a bad actor with the added benefit of incentivizing cleaner energy and perhaps more efficient means of transportation.
True. But it's relative. Even if Russia get 75% of the market price, that's still a solid buck. And since they can control the chaos, they can manipulate price.
So if everyone loses, not just Russia, and relatively The West has more to lose, where is the pain for Russia?
They are absolutely not going to have issues selling oil . Note that the US didn't even sanction their oil because a) they need it on the market b) they know they are going to sell it anyway
I have to take issue with this assumption. We've used such tactics against a number of previous bad actors, and yet those actors keep coming. The latest round (in this case against Russia) certainly wasn't a surprise about the sanctions, yes?
So again, back to my OP...Exactly how effective can we expect these sanctions to be if Russia knew they were coming and that threat didn't deter them? Who is actually feeling more pain?
The arc of my point is simple...Putin had a plan and we (and The West) led with our chin. What's our solution? "Print" more money? Let's not be naive, there are economic consequences to that here.
for who? Is this some kind of environmental argument. If so I think that is very short sighted. Renewables aren't going to magically overcome all of their headwinds because oil get's more expesnive.
All we are going to get is huge inflation and maybe a very marginal increase to the renewables time frame while we get a huge and costly headache in the short term.
I suspect the person suggesting it probably has a large income and only spends a tiny percentage of their income on fuel and food unlike a large portion of the world.
> Per [sic, "pre-"?] invasion Putin was effectively saying "Russia can't trust The West. They're out to get us" ... Biden follows that with "Lookout Vlad...we're gonna put a hurting on Russia."
Between those two (in-effect) statements, first from Putin, second from Biden, was Russia's/Putin's invasion of Ukraine. No irony there, just cause and effect.
You've missed it, just like Biden did. If you leave the US media bubble, you find that the US gov ( not the people per se) have a reputation. So now Putin - and others - can say "See. Told ya so." Because he promised anti-Russia and we delivered it.
> When Western nations threatened Russia’s access to Swift in 2014, Alexei Kudrin, a onetime finance minister close to President Vladimir Putin, estimated that it could reduce Russia’s gross domestic product by 5% in a year. Cutting Russia off from Swift could have ramifications for other nations as well, since Russia is a key energy supplier to Europe and countries rely on the Swift system to pay for fuel. Russian officials have repeatedly denied assertions that they intend to invade Ukraine.
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?
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.)
Which would significantly devalue the currency because you'd hedge your bets against not becoming unfavourable to whichever regime controls its issuance.
Shops aren't required to take the old local currencies anymore, but they can still be swapped.
Here for instances the information if the German Bundesbank, where you can still swap with the official rate of 1.95583 DM/€.
https://www.bundesbank.de/de/aufgaben/bargeld/dm-banknoten-u...
(Currently there is a restriction of in person service due to corona, but if you trust mail it works, else you have to wait for that Corona restriction to be lifted)
A notable anecdote is the Northern Bank robbery of 2004, when (presumably IRA) robbers stole 26 million UK pounds from the biggest Belfast branch of the Northern Bank, which, like other private banks in Northern Ireland and Scotland, issued its own banknotes. They held a manager's family at gunpoint during the action.
This total sum seemed to be far beyond the robbers' actual intentions, and the Northern Bank quickly issued a new banknote design, offering free exchanges for anyone with the old one.
Of course the robbed money had serial numbers, so it's now generally believed the IRA just burned most of the stolen cash.
Yes, the design is routinely changed to make the currencies more safe against falsification. And the old currency is often taken out of circulation simply by wear and tear. But it is the sign of a stable economy that legal tender does not have an expiration date.
"Note that it is U.S. government policy that all designs of Federal Reserve notes remain legal tender, or legally valid for payments, regardless of when they were issued. This policy includes all denominations of Federal Reserve notes, from 1914 to present as per 31 U.S.C. § 5103."
https://www.uscurrency.gov/acceptance-and-use-older-design-f...
When people talk about the manual inefficiencies of finance, it's referring to all this happening in the backend behind the abstraction of quick/automated digital payments in fiat currency. It gets especially complex in international finance, hence SWIFT etc.
It's mostly just numbers on a computer in a bank. There are regulations concerning what banks can do with those numbers, but it all boils down to people having faith in the system in the end. That's why bank runs can quickly lead to economic disaster.
No that's not how it works. Bank runs are possible even with full reserve banking. If banks make any loans at all then obviously they don't hold enough cash to redeem all depositors. Regardless of reserve ratios, the only way to reliably prevent bank runs is with a central bank that provides liquidity upon request.
> with full reserve banking. If banks make any loans at all
These are contradictory. The banks with full reserve banking can't make loans from easily withdrawable deposits. They can do that only with term deposits that can't be withdrawn for a specific period
Is it still true though? The Fed averted this through QE by buying assets of questionable value at the face value from the illiquid banks and providing them with enough cash.. didn't they?
> 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 world can create dollars out of thin air given adequate collateral. Read about "Eurodollars".
> This is a complicated question that will start a flamewar, but basically, any bank in the world can create dollars out of thin air given adequate collateral. Read about "Eurodollars".
This is true, but it's actually sort of a specious point. What a eurodollar deposit "really" is, is just a short contract. Your European bank takes your exchange and promises to give you back dollars when you ask for them. That they may not have them right now is just a technical detail. But the value of the dollar is still set by what the market is willing to pay for it. The bank going "short USD" is a risk it takes, not an inflationary pressure per se.
So... sure. Foreign banks can create dollars just like brokerages can "create stock shares"[1]. Except, they really can't. They're just playing accounting tricks.
[1] Or, more relevantly perhaps, how one crypto exchange can create wrapped tokens representing foreign coins. This capability was part of the exploit chain that led to the DeFi hack last month.
Just to make sure we are speaking the same language: If I have $1 in a checking account in a US bank, do I have one dollar, or do I have a dollar-denominated asset of $1 face value, backed by a dollar-denominated liability of the bank?
Reserve requirements at US banks are regulated by the US government as one of many mechanisms used to control the money supply. So... yes, sure. It's complicated, but a dollar at a US bank is a "dollar", because that's what "dollar" means.
The contention upthread was that foreign banks could do the same thing to print dollars. And, again, it's complicated. They sorta can, but only in the sense of placing a gargantuan short bet on the dollar. (A ton of short selling on a small security can push the price down for the same reason). So no one does that, because no bank wants to play that kind of game (or is allowed: all those large foreign banks are themselves regulated by their own national regimes).
If you walk into a US bank and deposit $1 cash, they now owe you $1. To what extent they must have ready cash, fed deposits, liquid assets, illiquid assets, etc to back that debt is the subject of bank regulation
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 distributed ledger like Bitcoin is a completely unnecessary waste of resources.
You describe money as if it’s just numbers being moved around: yes, the technology is just numbers moving around, but money is a social construct not a technology, the use of technology is a very small part of what makes money money.
As someone who finds himself thinking “wtf is money” every decade or so, the most recent book I read on this was pretty good - Money: The Unauthorised Biography by Felix Martin. It’s firmly in the “social construct” camp and makes some good arguments (to my lay mind!). There’s some really interesting stuff about the Fei stones https://en.m.wikipedia.org/wiki/Rai_stones
I'm not sure how you can say it is de facto centralized. You may have had a decent argument as recently as last summer when most of the mining was done in China. However, we just watched them ban mining there completely, and the network carried on relatively unfazed. Seems pretty distributed to me.
>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 distributed ledger like Bitcoin is a completely unnecessary waste of resources.
Hating the way modern banking works doesn't mean blockchain is a flawless solution. It comes with a ton of its own problems (not the least of which being that it's utterly inscrutable to normies). I personally would prefer we go back to currency backed by gold or some other comparable commodity (silver, etc.)
Sure, I'd agree commodity money is preferable (and certainly trustless in p2p transactions), and in many ways better than blockchain. I just don't see how to map
that paradigm onto a world where people who have never met each other regularly transact across continents without introducing some trusted 3rd party. And the moment you add that 3rd party you end up right back where we are now.
How do you transact across continents without a trusted 3rd party, with blockchains? The only transactions you can do trust-less are transactions that happen completely on-chain, i.e. exchanging some cryptocurrency for other cryptocurrency or similar tokens. As soon as you want to exchange currency for good or services, that trusted 3rd party becomes necessary in the exact same way, no matter how "smart" your blockchain money is.
By trust-less I am referring to a trusted 3rd party (e.g bank or escrow service) needed to mediate the transaction between the two parties. Not necessarily a lack of trust between the two parties themselves (obviously it would be foolish to pay someone you didn't trust at all in an irreversible way, but I can order something from Amazon any day with an implicit guarantee I will receive it or a refund, despite not knowing anyone there personally). An if you are referring to the shipping company that is going to move the goods, that would be a separate p2p transaction (and probably insured) between the seller/buyer and the delivery company.
Everyone who transacts in a fiat currency digitally has a defacto third (or more) party in the bank that mediates the transaction, and even non-digital cash transactions inherently include the central issuing bank (who you must trust not to debase the currency...just ask a Turkish citizen how that's going).
So a transaction using cryptocurrency has third parties, who do just the same thing and require trust, but which you don't want to call "defacto" because...?
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.
> 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 agree, but that's not always obvious at first glance. For example, I would've said Canada qualifies as a stable rule-of-law country with strong property rights up until a couple weeks ago.
What kind of citation are you looking for? That's not a controversial issue, it's just the basic reality of how fractional reserve banking has always worked. I'm sure that was covered in your Econ 101 class so open up your old textbook.
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 before in human history. For thousands of years, currency was based upon various measures of value which attempted to be as objective as possible. Semi-rare materials (e.g. gold and silver) and difficult-to-replicate coinage were some examples. The US dollar was decoupled from the gold standard under the Nixon administration. The end result is, one dollar now holds value relative to the amount of dollars in existence. To increase the relative amount of precious metals into the world is relatively difficult (actual physical labor is required), but to increase the total amount of dollars in existence is as simple as updating a database entry.
If financial controls work exceedingly well, the current economic system is viable. 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 physical circumstances because then at least we have the option of controlling it to produce better outcomes even if we don't always succeed.
It's true that every country can print as much fiat money as they want. It is obviously not true that this will make everyone rich because money is not wealth. Money is just an accounting system. It is useful to have a money supply that tracks actual wealth because it is useful to have stable prices. It makes planning easier. Fiat money is useful because it allows inflation/defaltion to be controlled by policy rather than the whims of fate. But it's still up to us to choose the right policy.
One dollar now holds value relative to your tax bill. If you're subject to US taxes then you have to hold dollars. The IRS doesn't accept precious metals, and if you fail to pay in dollars then they'll seize your other assets. (Technically the IRS might accept official US minted gold coins at face value but that's not really something that happens in practice.)
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 FDIC in the US is just telling banks "sure, we'll insure your bank accounts, don't bother sending us verification, we trust you!"
Whenever you hear someone complain about onerous reporting requirements or other such business regulations, remember that those things get put in place to catch shit like this.
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. '
As far as I know they really are just numbers in databases, but if it's foreign currency, they can't just magic them out of the DBA's fingers. There probably are ledgers that have to agree with each other, e.g. if a Russian bank claimed it had those 100 Trillion dollars from a Cypriot bank, then the Cypriot bank would have to confirm it gave them that much, and then show everyone the source of that money.
Which does make one wonder how easy it'd be for your trick to work.
North Korea is a major printer of fake $100 bills, a piece of paper that's actually worthless but others are willing to trade $100 worth of goods and services, or exchange for a bank transfer. Until a bill is found to be fake and destroyed, I guess there really is $100 more in circulation, and when the last person found out the note is fake, in effect NK has robbed them out of $100.
Within the US banking system, all of that is, for the most part, kept in line with the Federal Reserve System and other regulatory apparatuses to keep everybody honest. Outside of the US, you run into so-called "eurodollars" (unrelated to the Euro currency) which is a complete mess of intertwined financial systems from across the planet that a lot of people smarter than me pin on being the cause of the European debt crisis.
Let's just talk about USD specifically. (Other currencies work pretty similar, just with different central banks.)
The "single source of truth" is the Federal Reserve. Member banks (about 10,000 US domestic banks) can hold reserves directly at the Fed. Any reserve bank can directly transfer Fed reserves to another member bank or to the US Treasury using FedWire. The Fed "creates money" simply by crediting a member bank's reserve.
This is done in two ways, one is by paying interest on reserves. So if you're a member bank holding one million in reserves, the Fed simply bumps your balance up every night to reflect your interest payments. The other is by the Fed conducting "open market operations". When it wants to stimulate the economy by "providing liquidity" the NY Federal Reserve trading desk will buy treasury bonds and pay for them simply by crediting the balance of whichever member bank sold the bonds.
Member banks themselves can "create money" in the form of demand deposits. If you have one million in your checking account at Chase bank, all you really have is a promise by Chase bank to give you or whoever you want to send money to one million dollars. Essentially money is created the same way the Fed creates money, your checking account is nothing more than a credit in Chase's database.
However Chase's ability to create money is highly regulated and constrained. Banks have to conform to strict capital and leverage constraints. The OCC and other banking regulators will require that Chase hold enough assets in high enough quality to cover its deposit "liabilities". Some fraction of those assets will be dollars held as reserves at the Fed. Some will be bonds or loans, i.e. promises by other high-quality actors to pay dollars. Some of those assets could even be risky stocks, low quality bonds, commodities, etc. However the "risk-weighted" leverage ratio quickly scales up with risk.
In exchange for this regulation, deposits held at Chase or other member banks are treated as equivalent to Federal reserve dollars. That's because if for some reason, Chase is unable to pay back its depositors when they demand their money back, the Federal Reserve will "create money" to meet the obligations. This is essentially why bank runs no longer exist in modern banking.
Then there's the concept of "money markets", which is short-duration, high-quality assets that are essentially treated as "money-like". Often this tends to be short-term commercial paper from high-quality corporate issuers. A promise from Apple to pay $1.00 in 30 days is treated as "almost a dollar" by most of the market. In this sense, Apple can also "create money". But it's highly constrained, because it would quickly lose its credit rating or breach covenants in its longer-term bonds if it did so.
Finally there's the concepts of "eurodollar deposits". These are dollar deposits held at non-American banks but denominated in dollars. For example you could hold $1 million dollars at Mitsubishi bank in Japan, and you have a claim against Mitsubishi to pay out dollars whenever you want. Mitsubishi is not an American bank, and therefore is not directly regulated or insured by the Federal reserve. In some sense this makes eurodollars slightly less safe than dollars held at domestic member banks.
That being said Mitsubishi is regulated by Japanese banking regulations and implicitly insured by the BOJ (central bank of Japan). Mitsubishi will also make sure its dollar liabilities are never that large relative to its yen-assets. In the case of Mitsubishi failing, its highly likely the BOJ would bail them out by creating yen in the same way the Fed creates dollars. Some of that yen could be converted to dollars on the open FX market, and make the dollar depositors whole. Hence eurodollars are essentially just as safe as regular dollars as long as they're inside another high-quali...
I have been learning (via books, podcasts, coursera, etc.) about what money is and how it’s created, both domestically and internationally, both in commercial banks and central banks; and let me just say this is a superb summary of all of that. Bravo!
> In exchange for this regulation, deposits held at Chase or other member banks are treated as equivalent to Federal reserve dollars. That's because if for some reason, Chase is unable to pay back its depositors when they demand their money back, the Federal Reserve will "create money" to meet the obligations. This is essentially why bank runs no longer exist in modern banking.
This is not exactly true. Chase, like many other US banks, is regulated by the Fed, and deposits at Chase are insured by the FDIC (Federal Deposit Insurance Corporation). If Chase becomes insolvent, the FDIC will take over, pay depositors up to the FDIC insured maximum, and liquidate any Chase assets. The Fed is not required to do anything in such a situation.
The Fed may choose to conjure up some new money and loan that new money to Chase, and as Chase is a systemically important bank, the Fed might well do that before the FDIC steps in, but they are not required to.
> 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 bank could just increase that number to whatever they like. And say "Look, we own 100 Trillion USD. Now let's go shopping.".
They could, but these assets/liabilities would not be backed by any reserves linked to the USD payment rails.
Reserves are theoretically irrelevant (though practically regulated) as far as transfers between accounts of a single bank are concerned. But as soon as a second bank comes into the picture, i.e. for inter-bank transfers communicated via SWIFT or otherwise, all transfers will ultimately be backed by Fed account to Fed account transfers in the background.
> So I guess USD needs to be recognized by the US somehow?
Indirectly so, yes: What makes USD "real" is the ability to transact with the larger ecosystem of US and offshore banks that have a shared agreement on what "real" USD are.
Practically, this means being connected either directly (via a Fed account) or indirectly (via a bank that itself does have a Fed account) to that system.
> Could the US simply "void" all USD that are owned by Russia?
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).
I suppose what OP was arguing is, when bank A transfers to bank B, does bank B check with the Feds that the money from bank A is "real"?
And is a transfer from A to B really a transfer from A's account at the Feds to B's?
In that case, why would the US have to act "indirectly", threatening bank A not to work with bank B? They could simply deny any transfers to and from bank B's account at the Feds, which would make any transactions impossible?
> when bank A transfers to bank B, does bank B check with the Feds that the money from bank A is "real"?
Yes, unless the banks have mutual accounts with each other that they can use to settle instead. So, if bank B is accepting to be owed money by bank A for any transfer from A to B, they don't need to settle – but there's practical limits to that, imposed by both risk and regulatory concerns. Eventually, they'll need to settle up if funds flows A -> B and B -> A don't largely cancel each other out.
> And is a transfer from A to B really a transfer from A's account at the Feds to B's?
For wire transfers and ACH, it is.
> They could simply deny any transfers to and from bank B's account at the Feds, which would make any transactions impossible?
Yes – that's in fact exactly what a freeze of that bank's Fed reserves is!
> unless the banks have mutual accounts with each other that they can use to settle instead.
So this is just based on trust that the other bank will keep a truthful score of the transfer, and there won't be a dispute at settlement time?
If the banks are often willing to trade with each other "on trust alone" like that, I suppose that shows why the Feds can't always directly block dollar transfers, but have to rely on threats of account freezes.
> So this is just based on trust that the other bank will keep a truthful score of the transfer, and there won't be a dispute at settlement time?
Exactly: Either there is trust (and external settlement is not required), or there isn't, in which case banks will usually only credit incoming transfers to their customers once the underlying funds have settled.
Practically, trust is a spectrum, and banks might only settle once the outstanding balance in either direction has become too large (that's then called "netting").
> If the banks are often willing to trade with each other "on trust alone" like that
Bank balances are ultimately only be useful to their accountholders if they can effect some payment with them. There is therefore also a spectrum of fungibility of USD balances.
If you think about it, what makes USD useful is the fact that they can be used to pay for imports from the largest economy in the world. Only very few US companies would be willing to trade with you when being paid in USD balances at some foreign bank that they can't, as one significant example, pay their taxes with.
> 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 assets no matter the currency.
No. Swift is "just" a messaging system. No money is transferred over it.
Blocking Swift access makes it very inconvenient for banks to perform international settlement, because banks today rely on automated Swift messages to coordinate such transfers. However, even before Swift, international transfers were possible: by phone or telex. The banks have to find other ways to communicate, which isn't easy in practice, but not impossible. The fact that Russia has its own Swift competitor, to which some international banks might switch over time, would probably help with that.
But by freezing bank accounts at the Fed, the actual settlements - the events at which money actually changes hands - could be prevented in the first place, no matter the way in which banks agreed over those settlements. Switching back to good old telex (or another financial communication network) wouldn't help in such a scenario. Banks would have to fall back to exchanging big suitcases of dollar bills, which obviously wouldn't practically work.
Because no bank would survive this, they would immediately cooperate when confronted with such a threat and freeze any Russian-held funds, even if those funds weren't actually held in USD in the first place and thus would theoretically be unaffected by the Fed account freeze.
Yep – I suspect that when people say "block them from SWIFT", they really do mean "put them on international embargo lists and/or block anybody violating these at the various currency's settlement layers".
But as a short-term measure, revoking SWIFT access is probably also somewhat effective. As you say, setting up alternatives is not impossible, but not easy either.
> Swift is "just" a messaging system. No money is transferred over it.
I don't really understand this distinction. But before I can ask a question, there are some points about my understanding of how payments work, so that you can verify me:
1. All payments, no matter which payment system, can be performed only between 2 bank accounts. In order to send or receive money I must have an account in a bank.
2. A bank is pretty much defined by regulations it must follow. Following these regulations gives a bank some amount of trust/authority to say that a given person/entity has that much money within this bank. This money don't necessarily have to be backed by anything, so, ultimately, "it's just a number".
3. All transfers in a given currency are directly or indirectly performed via central bank that emits this currency (or FRS in case of USD). This is the ultimate top-level ledger for transfers in this currency.
4. So, ultimately to transfer non-physical assets (i.e. fiat money) 2 authorities for a given currency (i.e. central banks, or banks that follow CB regulations) must communicate one to another that a given number is deducted from account X and added to an account Y. There's nothing more.
So, if money is just a number, "transferring" it is just a message. So why exactly SWIFT is a messaging system that doesn't transfer money, and how money is transferred, then? And what (in general terms) even are these messages SWIFT is needed for, that aren't money transfers?
If someone with an account at bank A transfers some funds to someone at bank B, this transfer can occur by bank A decreasing a number and bank B increasing it. That's "just a message". However, it also is only part of the story. The only reason why banks A and B are able to offer this nice service of increasing some number here and decreasing some other number there is that both of them have an account at a central bank, over which they can eventually settle this transfer (together with a lot of other transfers, of course) amongst each other. Otherwise, bank B would suddenly be in debt with bank A, which is a situation that both of them can only tolerate for a very limited amount of time (and money).
That's why I consider the capability to settle the individual transfers to be more important than the capability to negotiate these transfers, and the time of settlement to be the actual time at which wealth is transferred. Before that moment, the transfer is effectively incomplete, which usually doesn't matter much for smaller sums of money, but in case of large amounts that introduce large imbalances between banks you can be pretty sure the banks will want to settle among each other first before the recipient gets full access to the transferred money.
However, all of this is based on the assumption that Swift is used for inter-bank communication as in "non-central-bank to non-central-bank". I always assumed that central banks would have their own communication channels with the non-central-banks and would not have to use some intermediary like Swift, as they themselves are a central entity able to standardize message formats and such.
> 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.
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.
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.
With the already agreed sanctions (so not swift, but the ones about transactions in USD and EUR etc) - it was also written that the russian banks have up to May 24 to settle their transactions. Is that the last level of inter-bank settlements that's about? Or does it mean that the sanctions are ineffective until then?
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 transfer times, and easy of payment... But it seems like tech build upon tech. centralized startups/companies owning payment systems (Apple Pay, Stripe, Adyen).... Man, i'm going to buy some more ETH :p
Well, no: this isn't the way we want it to work. It's how it has to work. Banks aren't just a necessary evil - any functioning financial system needs intermediaries. Furthermore, in all but a small handful of cases, those intermediaries need to be trusted and trust-worthy. Bitcoin, and all other protocols based on Satoshi's design[0], are limited to maintaining a secure ledger of "on-chain assets". Any interaction with the real world still requires a trusted intermediary to feed data back into that ledger; and once you do that the downsides of maintaining a distributed trustless global ledger for the virtual side of those assets becomes apparent.
See, the thing is that you will need trust at some point. Back in the day you had to trust that your business partner didn't just whip out a sword and kill you to take your money.
Then you had to trust that they didn't hand you false coins. After that came false checks. Nowadays you need to trust that online shops aren't trying to scam you.
Essentially whenever you do business there will be one person that needs to make the first move, crypto or fiat, someone always needs to deliver first. But if these two business partners don't trust one another then they need a third party they can both trust.
In our world these are most often banks or notaries. People that will take money from person A hold it till person B delivers then pass it on. If person B doesn't deliver person A gets their money back, if person A doesn't pay person B doesn't deliver.
Now, crypto is trying to claim that smart contracts will solve this in crypto world but that raises the question of who executes these smart contracts and who feeds them information. After all this once again feeds back into the trust problem.
Essentially you need banks not because they are modern or technologically up to date or fast, but because they are in fact fully capable of clawing money back if the laws allow them to, unlike crypto where your money is secured by math.
Because even if some people don't like it, the chance of the average person being scammed is far higher than your bank or the government misusing the trust you have given them and taking your money.
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.
This is similar to the "why are banks allowed to print money by issuing loans and I'm not?" confusion that sometimes goes around.
Your internal balances are only good so long as the rest of the system trusts you. Magic up some fake balances and good luck getting the rest of the world to continue to take you seriously. "You want us to believe you've actually got that 100 Trillion? Show us?" How would this Russian bank spend these trillions? They can't cash out, because they don't actually have that much paper USD. Transfer it to another bank somewhere more reputable? How are you going to make those transfers clear?
I invite you to open your own bank and print yourself ten million dollars out of the air. Good luck converting that number to cash or transferring it to anywhere else!
You mean that "real" banks have issued loans of 10M+ and not gotten repayed by people/companies who went bankrupt or such? Certainly!
Banks do their due diligence for a reason, but they don't always get it right. And a certain amount of "bad loans" is expected anyway. Part of the fees and interest they charge is to cover that.
But that's very different than simply printing yourself 10 million dollars. Or even just ten dollars.
It's also different from you starting a bank and saying you loan me 10 million dollars. I now have a statement saying I have 10M in your bank. I try to take that to a "real" bank to cash out. It's not gonna work.
Unless, it seems, you call them "Tether". Which is one of the reasons why I remain unconvinced that Blockchain _actually_ enables a financial system requiring less trust than the current mainstream financial system.
H.4.1 is a really useful and important data set. For example, you can see that US Fed is holding T2.7$ worth of mortgage backed securities i.e., it's funding them.
> Could the US simply "void" all USD that are owned by Russia?
Beyond a certain threshold those USDs are typically stored as US Treasury bills because it's too risky to deposit billions of $$ in bank accounts. The risk of bank going under is real at those deposit levels.
For anything more I highly recommend reading up Fed Guy blog [1]. It's one of the best sources of this information I've come across; he's extremely concise, no-jargon and explains the core principles really well.
While at it, take a look at this BIS data[2]. tl;dr Russian residents owe ~B121$ to other countries' banks.
In a computer account. Here's a 22-second clip[0] from a 60-Minutes interview with a former chair of the Federal Reserve talking about how money is lent to banks. Literally just numbers on a computer.
"...We simply use the computer to mark up the size of the account that they have..."
USD are ultimately bearer notes, we've just built a bunch of trust-based infrastructure to enable transactions without moving physical currency.
The key feature of this system (and what everyone is ignoring) is bank accounts that x/German bank has at y/Russia bank (this is also the actual means of transaction for SWIFT).
So in your example, 'y bank erroneously says we have $100tn' would actually just mean 'y bank is willing to credit the account of x bank by $100tn.'
If x bank then tried to pay y bank for a separate transaction with those fake $, then y bank is the loser anyway.
EDIT: Put alternatively, 'making up' USD is a near equivalent to making a loan, which is sort of the core thing a bank does anyway.
ITs a number of lots of computers that use crypto algorithms to decide what the True ledger is.. So it cant be edited like a row in a DB can. But yes. you're 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.
Unfortunately many won't until they find themselves in a circumstance where decentralization is of vital importance. At which point it may be too late.
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.
They can "print" as many USD as they want in-house. But in order to process transactions abroad, they need a US bank account. They can't print money in that.
The US sanctions (freezing their US assets) has more effect, in that regard, than a SWIFT blockade. The US seems to be the interested party in this war, and Germany is much less enthusiastic about it. Remember, SWIFT is a Belgium company and the US has been hostile to European financial institutions lately.
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 the end (modulo interest, defaults, etc).
As an aside, that’s why low interest rates stimulate the economy: more loans are made, and more money is created, spurring more economic activity.
> 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.
>> 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 while that is indeed technically true, it only applies to money withdrawn as banknotes. Given that most of the economy is electronic transactions, that loan is to all extents and purposes real money created by the bank out of thin air (modulo capital requirements to back debt).
I address electronic transfers in the next paragraph. Even if initially transferred only within the bank, it is likely to eventually be transferred to another bank, which requires the bank to transfer corresponding reserves to that other bank.
Only the Federal Reserve can create truly unlimited amounts of money without the risk that customers might request transfers that exhaust their reserves.
Complying with reserve requirements imposed by the Federal Reserve on banks help to mitigate this risk, but they are not the true restriction. Even if the reserve requirement was zero, banks would need to keep some reserves or they would be completely unable to fulfil requests to transfer funds to other banks. And even if a bank exceeded the reserve requirement, for example by keeping 50% reserves rather than 10%, they would be insolvent if customers requested 51% of balances transferred out and were unable to cover it with loans from other banks.
> 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."
Yeah, they can, and do. This is what Eurodollars are. And why the World is continually on the brink of financial collapse whenever Dollars get too scarce.
> 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.
A bank could easily create fake money into its own accounts, but it would have trouble transferring that money over to other banks. I wrote extensively about this topic here: https://www.attejuvonen.fi/money-out-of-thin-air/
> A bank could easily create fake money into its own accounts, but it would have trouble transferring that money over to other banks.
In fact, isn't that indistinguishable (mathematically) from paying interest? The bank's internal accounts all go from X to Y. In theory, the bank should made more money that that in total, so at any given point the sum of all accounts is less than the banks money and accounts recieveable (usually via loans). And the bank can provide that money to other people if needed. But if a bank paid 1000% APR on savings accounts, all that would happen is the bank goes belly up and a lot of those accounts won't be worth the numbers they claim to have.
Well, it's a number in a ledger system somewhere (e.g. mainframe system, Oracle database, or what have you), with a lot of auditing, reporting, and procedures around changing that number. (Though, having an internal API to instantly get a new bank account number always seemed kinda funny to me).
Slightly related, I'd have to find it again, but I recall there was at some point an assembly level hack on some Oracle database holding core banking in one country.
> 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.
All these sanctions are a bit of the joke when you are dealing with an insane leader in a country without elections and sitting on top of a pile of reserves. And the west is not doing one thing that could actually actually make a difference -- cutting oil and gas export because the west thinks it'll be too expensive for the west.
I feel these sanctions are still more of signalling, than actually doing something useful to help Ukraine.
That's because Hitler kept winning. He militarized the Rhineland in 1936, the allies did nothing. He took over Austria in 1938, the allies did nothing. He occupied Czechoslovakia later the same year, the allies did nothing. With every win, Hitler's popularity increased at home. He's reported to have been quite surprised when the allies finally declared war after Poland.
Neville Chamberlain negotiated with Hitler over handing Germany large swaths of Czech territory critical for border defense. The Czechs weren't invited to the conversation.
Hitler didn't have nukes and super-sonic missiles -- you cant do to Russia what you would want to do to Hitler.. at least not without a very heavy price..
And when Putin threatens nuclear first strike unless the west removes sanctions, or abandons the baltic republics, what next?
At some point you have to just call their bluff. Earlier is better than later. Putin himself knows that he'll be the first casualty in nuclear war, and I doubt very much that Putin's deputies would go along with a plan that results in the annihilation of the Russian people. He's playing a high-stakes game of chicken.
What does 'call his bluff' translate to in this context? Not take the threat of a nuclear war seriously and engage with Russia militarily anyways as-if the threat didn't exist?
Didn’t seem to end particularly well after the overthrow of the Romanov dynasty either. Adding nuclear weapons doesn’t make the prospect of political upheaval (let alone violent revolution) in Russia sound any more desirable.
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.
I've been thinking about this all day and feel incredibly upset when I see what's going on.
What can we do? Have you seen what the Russians did to Grozny?
It all boils down to the fact that EU simply can't start a war with a maniac that has thousands of nukes. I'd say let him have it and Ukrainians refugees are welcome here by the millions.
Putin's now threatening Finland and Sweden should they dare join NATO and there's talk of the conflict spilling over in to Moldova and Georgia. That would change things drastically. As soon as EU or US forces take military action against Russia we have to assume he'll retaliate and then it's basically WW3. If that's what it takes to get rid of this maniac then so be it but the consequences for everyone will be severe.
> Putin's now threatening Finland and Sweden should they dare join NATO
do you have a link i can read up on? I would imagine everyone is running to the safety of NATO now and i can totally see Putin saying "if you try then you're next".
> ...then it's basically WW3. If that's what it takes to get rid of this maniac then so be it but the consequences for everyone will be severe.
"severe" would be the mildest term possible to describe what would happen heh
Sweden and Finland probably don't feel the need to join Nato but the threat that was made is enough to put EU on edge. Scandinavia is much "closer" than Ukraine.
The inescapable fact is Germany intentionally put themselves in a position to be more dependent on Russian oil/gas with their shutdown of nuclear power. The previous US president made a point about how Germany's decision contradicts the purpose of NATO.[1]
The decision doesn't contradict the _purpose_ of NATO, which is a fairly straightforward military alliance. It does impact the _effectiveness_ of NATO, because one of its member states is economically dependent on a non-member state with a high likelihood of conflict.
Trump is saying that NATO shouldn't exist because of this intertwinement, and there's a sentiment going around that NATO caused the conflict by existing and forcing Putin's hand. Saying things like "the purpose of NATO is contradicted" plays into that narrative.
Interestingly, trump hated NATO and wanted to leave it. I firmly believe that his griping about issues like this, while accurate, was really a move to weaken the alliance and make the relationship between the US and European nations worse.
There hasn't been a large change in imports of russian gas in Germany since the start of the Energiewende. [0] Gas is largely used for heating, electrical heating was never widespread and would not have been a viable alternative, even with keeping more nuclear power online, since it is uncompetititve without major subsidies.
Anyway, gas consumption as a percentage of the total mix has been stable since before the start of the Energiewende. [1] Germany replaced some coal and nuclear with renewables and kept the rest stable while also substantially increasing total energy demand.
Since your are quoting one of the worst people I've ever had the displeasure of having to listen to, it is curious that you ignore that the US is a major importer of russian resources, too, and is now silent now about boycotting russian imports. [2] It was all fun and games when the trade-off was that Germany would have to import expensive American natural gas, but biting in the sour apple yourself doesn't seem to be on the table, at least for now.
By your own [2] above, Germany still consumes more than 67% of its energy from oil, gas and coal. Had it chosen to scale up nuclear instead of scale down nuclear, it would be less dependent on that 67%. France famously gets over 75% of its electricity from nuclear, and has plans to expand capacity by adding 6 more reactors [4]
U.S. is not a major importer of Russian energy. U.S. is a net exporter of natural gas.[2]. Foreign imports for energy fell 30% under the previous admin [1].
Russia only accounts for 6.6% of our foreign imports [1]. And foreign imports have become less important for the U.S. as it has become a net exporter of oil & gas [3].
Under previous admin, our natural gas exports doubled [2].
Mutual economic relationships have been seen for decades as means to lower the risk of military conflicts with Russia. I am not sure how much this was considered for the nuclear exit, but in general Germany has more consciously chosen closer ties with Russia over seeking independence than it accidentally stumpled into them.
Germany has traded energy dependence on Russia for pharmaceutical, machinery, and car exports that Russia can get elsewhere. Interdependence works well but this appears quite one sided. In explains their inaction in part, though 40% of Germans also supported the annexation of Crimea.
The energy/heating situation in Europe is very tenuous. In the UK most everyone has gas central heating, and energy bills are skyrocketing. This is the most pressing domestic issue in the country right now, far above covid. Johnson is attempting to gain some popularity by putting on a tough face, but there is no chance he can survive if energy prices rise any further.
Here a staggering number of people die every winter due to not being able to afford heating[0] (something like 30-50k). I think it's not quite so bad in other EU countries but some (like Germany) are still extremely reliant on Russia for energy. Due to strategic shortsightedness, cutting off oil and gas exports is simply not an option.
I absolutely agree (I live in the UK), but in the end it's a question of money I believe. Somebody has to bear the cost of more expensive fuel/gas. I am sure if UK wanted it could have subsidised those costs till the next winter. I don't know how expensive that would be, but I doubt it's astronomical. On a balance of costs between squeezing Russia more or saving that money they (and Europe it seems) decided to save the money and go for measures like prohibiting Aeroflot flights or throwing Russia out of Eurovision.
30-50k is just the excess mortality in winter months. Further in the article they estimate the number of people who die whilst having difficulty paying for heating to be 3k, and even that is only a correlation - poorer people die earlier for many different reasons
Russian citizens like me will be hit hardest, as usual. Large institutions and wealthy individuals will find another ways to transfer money. Costs of goods and services will rise.
I was watching a mainstream news report (I'll try to find it and edit my comment) where the host and the guest were talking about the impact of economic sanctions. They said it's not intended to stop Russia, but to inflict pain on the citizens, so that they citizens will turn against leadership.
In that moment, it really clicked for me how much normal people are pawns to be used in much larger games. And there apparently is no morality when dealing with pawns, unless it is convenient.
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))
1) Having more money than the median doesn't put in you in the ruling class. 2) How does the proportion of HN users that are ruling vs working class add to the conversation about not abusing the working class?
If the US citizens can't improve their own govt and get them to stop neverending wars, I think it's a tall order to expect citizens in a dictatorship to do it. Point isn't US bad -- point is, no easy way to affect change other than revolution which too ends up with bigger tyrants..
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.
Soldiers are fair game to me, because they often choose to participate. Normal working people are just trying to survive, and destroying their lives in the hopes of influencing their country's leadership is on a different level. I get that it's war and war isn't fair, but my point is that war clearly reveals the underlying classes of people and how they're treated.
Ukraine is under general mobilization now. So no choice whatsoever. Even in volunteer armies one cannot ignore social economic pressure. Usualy the low grunt, those that do the killing and dying, are just poor bastards. On both sides. I read a comment not long ago: Simple soldiers on both sides have more in common with each other than their leadership. That very much true. Are aoldiers, and other combatants legitimate targets? Yes. Does it make their losses and casualties any less tragic? No.
They're both in Kyiv, during an interview earlier today Poroshenko asked the west for more help and talked about the steadfastness of his resistance group, which he is fighting with, during the interview he showed off his rifle:
I recall seeing an image of Zelensky carrying a rifle and wearing tactical gear but can't find it, maybe I misremembered that. He is in Kyiv though, unless he shot this video and left immediately: https://www.nytimes.com/2022/02/25/world/europe/ukraine-zele...
OK, that makes more sense. I guess you were just using figurative language.
I believe that they are in Kyiv, and armed, and interacting with the troops. Fighting in battle would be a whole different story. It would certainly be brave, but unadvisable for Zelensky to be spending time in firefights instead of doing his job.
> They said it's not intended to stop Russia, but to inflict pain on the citizens, so that they citizens will turn against leadership.
Which country has it ever worked out on? Cuba? Venezuela? North Korea?
None of them have turned on their dictators. Rather, they are living life in misery. What is worse is they have been not just cut off monetarily from the rest of the World, the dictators have made sure to censor all content coming into the country. So they have no idea (or worse: false propaganda) of what is going on outside their territory.
I haven't seen sanctions actually work in even one case (will be happy to correct myself if there has been a case where sanctions actually worked). Where people fought back against the dictator and established democratic rule. Even if there were popular uprisings it has lead to establishment of even more autocratic rulers or worse, control by militias/warlords or terror groups.
Sanctions would work indirectly in the sense that the people would support regime change even if they can't bring it about themselves, if it means sanctions will be lifted and their standard of living will get better.
I don't think in any of the countries you list there's popular support of the leadership.
Cuba/NK are much smaller countries. For Venezuela, it insured the country cannot function properly. Russia is huge. Russia becoming the next Venezuela will trigger a sequence of events that will lead to its de-fragmentation into smaller states. (ie: Chechnya will probably go rogue)
Any broad sanctions will always affect the poorest more than the richest.
Modern warfare also affects poor people more than it affects the rich — children of Russian oligarchs are off in New York and London, not fighting on the battlefields.
But the sanctions are very much meant to stop Russia's invasion of Ukraine, and to disintentivise Russia from invading other sovereign nations. Only Russians can stop this aggression.
Well, a) they are literally the only ones who can do anything about Putin's regime, and b) they are paying taxes, no? Those taxes pay for the Russian military. Destroying a country's economy is just about the only way to stop a modern nation's military.
Oh, and c) are there any other knobs to adjust Russian foreign policy?
a) I am unconvinced that they have any more direct power over their leadership than any other country's citizens do. Is this naive? b) We all know that taxes are involuntary. You make it sound like the Russian people are complicit in this attack. c) There isn't always a knob to turn when someone does something that you don't like. A bully can sometimes take someone's lunch. There doesn't seem to be unified international response, so this is what happens. The best I've heard is "let's hurt their citizens and see if it helps."
I have a VPS I bought at OVH to act as a VPN, does it mean I won't be able to access information freely on the Internet if SWIFT is cut (I use a Russian bank account)? Or maybe I can open a bank account in some neutral country?
If you make card payments, SWIFT won’t be what cuts the renewal.
If you make transfers, it may be temporarily interrupted or slower while your bank shifts their integrations. They plausibly have either accounts at the ECB, or relations to a bank that does.
There may be KYC hurdles to opening a EUR account online.
I believe the poster meant that normal people like him (and myself) will be hit the hardest [by the SWIFT cut-off (or other sanctions)] and the influential and wealthy will continue their act as they are prepared / wealthy enough to not care.
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.
> That's the propaganda used to justify sanctions, but historically, no government has been overthrown due to sanctions.
Since the idea is to get governments to change their behavior and being overthrown is just one of the extreme tail risks that play in to motivating that behavioral change, that's neither surprising nor inconsistent with sanctions working.
If I understand the parent's argument, it's not that there are alternatives - it's that the actual goal of sanctions is to "rachet up" to more aggressive responses, possibly including military responses. I don't disagree that they can have this effect, but I really don't think that's the direction the US wants to go right now.
There's evidence that economic sanctions destablizie the specific leaders of countries they target, even if they do not affect direct regime change.[0] I don't think it's propaganda to say that's the goal of sanctions; I think the argument that the sanctions will definitely work is propaganda/tough talk on the part of the US. Candidly, I think much more severe consequences than unilateral sanctions would be necessary to actually stop this invasion at this point. However, given that Putin is the driving force behind this invasion, it makes sense to take measures that are designed to get rid of him.
Yeah I just lost my business banking and can't anymore get payments from the states. But, most Russians support war, I don't care about them and ok with small inconvenience.
I know this might be perceived as a flame-inviting response, but who are those "most Russians" that "support war".
Even pretty patriotic people in my social circle don't support it. Now, of course, it might just be me and my circle, but the "majority supporting war" might also be someone's circle, and not really representative of reality.
In any case, from what I see, most people are just afraid. Withdrawing cash, some stocking food. It's not like the west is watching a horror show, and the people in Russia are watching a comedy. Everyone's losing. I honestly don't know who's the winning party here.
I don't really care much about the state of Russia, and maybe, just maybe the sanctions will have some positive effect; just wanted to say that "most Russians support war" is a very shabby argument in support of approving of punishing "most Russians".
IMO I think such acts only make the state stronger.
People will be “cheaper” buy. Votes will be cheaper. It only helps consolidate the wealth in the target country and makes the massez more reliant on large institutions and wealthy individuals.
I wish you best of luck in dealing with things to coms brother.
War has costs for everyone. Consider these hardships doing your part to stop your country's aggression, and remember the Ukrainians have it much worse than you.
Russian citizens should be formenting anti-Putin thoughts in the general public. His popularity allows him to do this nonsense. If the sanctions help convince you such a thing is a good idea then they’re working as intended.
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 states it perceived as even remotely objective to US interests. Is your president elect too socialist? you get an aircraft carrier floating in your strait for a year. did you nationalize your oil fields? sanctions mean you cant sell it to anyone. Cuba to this day still enjoys endless sanctions for resisting regime change.
in 2022 sanctions are to international diplomacy as a tantrum is to a toddler. theyre effectively meaningless as most capable, observant countries have managed to sidestep in part or in whole the once dominant US hegemony of finance and trade. even the threat of a blue-water naval presence is an unspeakable taboo as Russia is one of a handful of emerging countries you wouldnt dare send an aircraft carrier to patrol, unless its goal was to secure the ocean floor.
The only meaningful threat SWIFT offers is the ability to assuage short-term market fears among traders that dont fully understand just how inapplicable SWIFT is in this case.
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.
Him thinking that, however qualified he is, does not mean he's right. Being the CEO of a hedge fund, with a personal grudge against Russia, does not make you infallible.
The US benefits enormously from owning the reserve currency and running the world financial system, and the ultimate effect of our trigger-happy approach to sanctions is to push countries away from those, especially with the US becoming a smaller percent of the world economy every year. Even the Europeans are sick of it. The Europeans only play along still because they are militarily dependent on the US, in part because their populations have, under the comfort of the US security umbrella, developed irrational political beliefs against building up their own militaries.
> The US benefits enormously from owning the reserve currency and running the world financial system, and the ultimate effect of our trigger-happy approach to sanctions is to push countries away from those
That seems belied by actual history. The US has been a "trigger happy" sanctioner for basically the entirety of the post-war era, and the dollar has been dominant throughout. What would change now that didn't when we sanctioned Iran, or Iraq, or Cuba, or Yugoslavia, or...
Eventually a tipping point is reached and a seemingly minor event can cause irreversible change many magnitudes larger than the event itself. This is ok if you're certain where the tipping point exists and can keep from getting too close to it but in economics, especially when intertwined with geopolitical matters, it's doubtful anyone even knows the ballpark of where that tipping point exists until they're looking at it in the past.
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"
Might be worth considering that some of the people in this conversation are well versed in foreign policy debates and don't need to cite to names to invoke reasonable ideas.
Might be worth to consider that HN commenters clearly are not foreign policy experts and should be citing people that are. Lots of armchair "experts" around here thinking that because they are smart people who work in a stem field, that their opinions should carry any weight. Would you take tech advice from a history professor? No? Then why is it ok to do it for geopolitics?
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.
> in 2022 sanctions are ... effectively meaningless as most capable, observant countries have managed to sidestep in part or in whole the once dominant US hegemony
This is only true to the extent that the US unilaterally imposes sanctions. The proposed sanctions involving SWIFT are multilateral, with the support of the entire EU. That's around double the economic power of the US alone, and roughly half of the entire world's GDP. Being sanctioned by half of the global economy (more, if Asian democracies participate) is very punishing indeed.
The EU would only go along with this because the US has them by the proverbial balls. European militaries are a joke and there is no domestic political support for building them up.
America represents 40% of NATO forces. America guarantees the physical security of Europe in consultation with the governments of these nations, but there is an inherent power imbalance here.
In this particular conflict, the stakes for the EU is much higher than for the US.
Sure, the US is historically (recent) more happy to go into conflicts around the world, but this is a conflict bordering many EU states.
The Baltics, Poland, Slovakia, Hungary, Romania definitely aren't happy seeing Putin on their doorsteps.
A reminder that two of Western Europe's militaries are nuclear, which hardly makes them "a joke". You seem to be projecting the state of Germany's military to all European forces, which is... questionable.
The nuclear arsenals of France and the UK are a bit meager relative to Russia and the US. That doesn't mean that they can't inflict a good bit of damage but MAD isn't in play with them unless the US is backing them up with its own nuclear arsenal.
French (and probably British, although I know it less) doctrine is not MAD - it is to incur "unacceptable damages" to an offender. And 500-ish combined warheads sure sounds like it can achieve that.
Keep in mind that most modern nuclear warheads are MIRV weapons, which dramatically amplifies the scope of the damage. These aren't Truman's nukes anymore.
The EU collectively outclasses every likely regional aggressor or likely regional coalition, and can project power better than any but a handful of other states (most of which are unproven against that challenge). Throw in Britain and only the US—which is in a mutual defense pact with several EU states—is clearly ahead of them. How's that "a joke"?
European countries could barely sustain bombing runs during the Libya intervention. They struggled to consistently field single digit number of planes at the same time.
this is an excellent point, one i hadnt considered. SPFS only has 23 banks connected to it as of 2020, so if its to be an alternative Russia would have to consider it as an alterative of last resort. just how strong is it?
the consternation im still faced with is "with the support of the entire EU." It may be difficult to secure a resounding vote with the bemoaned sword of Damocles. much heating fuel comes from Russia in the dead of winter.
still other HN posters make a great point (and in other posts too) that every time SWIFT is disconnected, it popularizes alternate markets at the expense of US and EU interest. certainly a stronger SPFS must be taken into account.
Yeah I actually have no idea where India stands geopolitically and I had totally forgotten their considerable impact.
I wonder how their government views these events?
They did not condemn it but they also did not signal support like China did - I suspect Modi expected Putin to stop at Donbas and sees his best option right now as a ceasefire, which is what he's openly asked for as well.
Unlike Russia's allies other than China, India cannot afford to be shut out of the US and supported by Russia, and unlike China, Europe and the US can impose fairly strict sanctions on India in the short-term.
Access to SWIFT is one of several economic tools which work together to limit and essentially “bleed out” the target economy. Although Russia acts like a big bully, their economy is relatively small (e.g. smaller GDP than Italy) which makes economic actions especially impactful (even if it will take a moment for them to fully reach their potential).
> Cuba to this day still enjoys endless sanctions for resisting regime change.
I mean, I suspect we agree that the embargo should be lifted, but that's a really poor way of saying "communist dictatorship with a penchant for, among other things, lining up homosexuals against a wall and shooting them".
Hopefully the last few days have reinforced that even if one country does things wrong sometimes, it doesn't mean the other side is a good guy.
> in 2022 sanctions are to international diplomacy as a tantrum is to a toddler. theyre effectively meaningless
Earlier today a report on BBC said existing sanctions on Russian already made their economy suffer to a significant extent. I forgot the percentage points they mentioned but it was surprisingly high. Applying even more sanctions will unfortunately hurt the Russian people the most and the discontent that will create among the people over the many years to come should not be underestimated.
> in 2022 sanctions are to international diplomacy as a tantrum is to a toddler. theyre effectively meaningless
I don't see how this follows from your (correct) description of US influence in the cold war. Soft power works now the same way it always has, all it requires is coordination on a "pool of influence" large enough. It's absolutely true that the US can't unilaterally do what it did in the 70's. But the e.g. USA+EU+Japan+Korea? That's pretty dominant, still.
Russia's only out from something like that would effectively mean becoming a sattelite state to the PRC. And... maybe that's where we're headed. But it's surely not where Putin wants to head, so it remains leverage.
> in 2022 sanctions are to international diplomacy as a tantrum is to a toddler. theyre effectively meaningless
This is just straight up wrong. This is why the Magnitsky Act got Putin so rattled. It is also why Putin has said being cut off from swift is an act of war. If it's meaningless, why does Russia care so much?
> ...theyre effectively meaningless as most capable, observant countries have managed to sidestep...
In this case, though, one wants to apply pressure not on the country, but on the surrounding oligarchs. When a nation is, essentially, a syndicate of organized criminal oligarchs around a strongman, financial pressure on those people is exactly what you need.
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.
How many people complaining about the weaksauce sanctions proposed against Russia would be prepared to deal with the effects of more stringent measures?
I'm thinking especially of people in Europe castigating politicians for not wanting to clamp down hard on the Russian energy sector. The way I see it, the europols are in a no-win situation. If they go easy on Russia and keep the gas and oil flowing, they look like weak and waffling appeasers, which yes, they are. If they cut off the Russian gas supply, will the people posting Ukrainian flags on Twitter remember or care about the noble root causes when faced with unprecedented energy prices?
I.e. the politicians know their people better than they know themselves, and they're well aware that showing support on social media is one thing, but being asked to make drastic sacrifices is quite another. These politicians will not survive if they do what their voters are clamoring for them to do.
Of course, they probably wouldn't be in this position if they hadn't taken energy strategy advice from Greta Thunberg, but that's neither here nor there.
> Of course, they probably wouldn't be in this position if they hadn't taken energy strategy advice from Greta Thunberg, but that's neither here nor there.
What the fuck? I'm pretty positive that the energy strategy of major western powers was not radically revamped in two years on the advice of a teenager. If anything, they're in this position because they pursued an opposite strategy to what ecologists advocate: reduce dependency on fossil fuels including Russian natural gas, and invest massively in renewables + nuclear to bridge the gap.
I think what they were referring to was Germany prematurely decommissioning nuclear plants only to start replacing them with coal and (more importantly) Nord Stream 2, which I never understood either.
Replacing them with coal would have been a good idea, at least as far as Russia is concerned, since it’s a local source of energy. In reality it was, indeed, natural gas and renewables.
Bringing Thunberg into this discussion serves no purpose except making conservatives giggle because they love hating her. She had nothing to with the decision, and being anti-nuclear isn’t what she’s known for.
Northstream 2 was, indeed, a terrible idea. But it never became operational and therefore does not affect the current situation.
Replacing them with coal would have been a good idea, at least as far as Russia is concerned
Did Russia have some involvement in Germany's nuclear power infrastructure? I'm not aware of that, but interested to know more.
Bringing Thunberg into this discussion serves no purpose except making conservatives giggle because they love hating her. She had nothing to with the decision, and being anti-nuclear isn’t what she’s known for.
Sure, it was probably a bit forced. I wouldn't have chosen to bring her up. Either way, her anti-nuclear stance is now a relatively widely publicized recent event; I don't see that GP did something particularly wrong in referencing it.
Northstream 2 was, indeed, a terrible idea. But it never became operational and therefore does not affect the current situation.
Huh? It's directly related to the current situation.
If you are pro-SWIFT-exclusion-of-Russia and live in Germany please contact your national representatives and let them know you're willing to bear some hardship so others don't have to.
Thanks I had quite a laugh reading your last sentence because most peers here in Berlin couldn't be bothered to report anything that doesn't directly impact them.
For people living somewhere out rural shthole in West Germany perhaps might be triggered enough to file a report with the myriad of administrative concerns available to the spoiled citizen
How will Germany pay for Russian oil if they cannot use SWIFT anymore? I know! Our politicians will simply use whatever financial system that Russia will propose.
It would be even possible to trade a fleet of AMGs for a week of oil if need be. Removing SWIFT would only delay trade between Russia and Germany not hinder it in anyway.
In fact bartering system would produce more efficiencies, a bullet proof AMG G-wagon for instance would fetch more oil than a regular C-class offered to Putin's low ranking officers!
All in all, Ukraine gains nothing from this action, it would only give Putin the political ammunition to sell the narrative that Russia is under attack.
The US certainly stands to gain everything and risk nothing in this region and its puzzling to me why Ukraine would choose this as a hill to die on as if their self sacrifice would move the hearts and minds of NATO officers on some emotional basis
Germany wouldn’t pay for gas and oil, and deliveries would stop. Reserves are probably high enough to last into spring, so there’d be about 9 months to find alternatives before next winter.
Russia, meanwhile, would be bankrupt within a few months.
> A cutoff from SWIFT may also have longer-term second-order effects on Bitcoin and non-fiat currencies.
And remember that Bitcoin has a fascinating property here-- the more demand there is for transactions on it, the better it gets at scaling for something approaching SWIFT level of transactions.
Oh wait I'm thinking of Bittorrent's scaling wrt popular torrents. Yeah, Bitcoin's ability to scale is complete shit.
Bitcoin's Lightning Network scales just fine, but based on your comment it doesn't look like you are interested in how Bitcoin works, instead wanting to jump on a bandwagon.
Lighting doesn't work for large transactions, and isn't trustless for very small transactions. And lightning relies and being able to close channels so lighting security breaks when Bitcoin is congested.
Also, if global Bitcoin demand increases because it’s used to circumvent Russian sanctions, the more likely it becomes that Western governments will simply shut down exchanges within their reach. And that would certainly have a chilling effect on Bitcoin price.
While, in principle, I support sanctions against Russia for their actions, I can't help but think they are using Ukraine as part of a larger economic game. Basically, they are forcing countries to take sides to some degree, and any country that wants to continue trading with Russia will have to adopt an alternative financial system/network, one that is not Dollar-centric like most of the world currently uses.
I think Putin means to hold out economically as long as possible and give other countries a chance to adopt this financial network and eventually get to a point where Russia doesn't need to play by the West's rules anymore, because sanctions will have a diminished effect.
I think this has things the wrong way around. Russia and China have for the last twenty years been trying to break free of the dollar-centric financial system with some degree of success: both countries have, for instance, built up large gold reserves. Now Russia is using that prior preparation to engage in old-fashioned revanchism. Rather than being a move in a bigger game, I think this is Russia cashing in its chips.
The potential for bad consequences for Russia in the months ahead depends to a large degree on how China reacts.
China is very different philosophically. Hide your strength, bide your time. Their economy has also had a meteoric rise unlike Russia which is a flatlined raw resource economy. I mean Russia did for about 8 years but China is going for multi decade before they start cashing in.
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 support it willfully (in opposition to Bitcoin) thanks to several years of anti-Russia propaganda. It's a perfect mousetrap.
All Russia has to do is tell European countries reliant on its energy exports that they'll only be accepting Bitcoin moving forward. This would force those countries to scramble to get Bitcoin (if they don't have it already), forcing the price up rapidly.
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[ 4.2 ms ] story [ 295 ms ] threadCan't think of a worse format to share a few sentences of text.
For authoring: https://threadstart.io/
but I’m sure there are more
https://news.ycombinator.com/newsguidelines.html
2. It's actually much harder than convincing 51% of miners that Russia is bad. You'll need to get them to agree on a list of addresses to freeze/sanction. Given that bitcoin addresses are pseudonymous, I'd imagine on agreeing on such a list would be politically impossible. Not to mention, how such action would affect trust in the network and the value of bitcoin
Coming up with a list of suspects is easy, convincing others that they're totally guilty is the hard part. I doubt miners would want a company like Chainalysis to be judge, jury and executioner of the bitcoin network.
There are protocols that work around address banning
TIL the NSA [1] has it's tentacles in SWIFT too..
[1] https://en.wikipedia.org/wiki/SWIFT#Monitoring_by_the_NSA
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?
> You then get fragmentation and SWIFT losing some of its "soft power".
This already lost any power it had in 2014, because the threat of disconnection was wasted.
An honestly, EU lost its face now to talk "soft power." Every foreign head of state going to meet EU bureaucrats will now look at them, and think "can I rely on these people who threw out every treaty for a want of sleeping without a blanket?"
[1] https://en.wikipedia.org/wiki/Empire#Present
> can I rely on these people who threw out every treaty for a want of sleeping without a blanket?
Why isn't the US sending troops? Because the risk of escalation and nukes are unacceptable. In case you forgot, Europe also has nuclear powers and the risk of escalation is higher if the EU as an organization openly acts on more then soft power.
And as far as i know, only the US and the UK are ignoring a treaty to offer security to Ukraine.
Again, I'm not satisfied with the response so far, but what exactly are you suggesting so that EU bureaucrats don't lose their credibility?
He can lob a nuke right now, but he knows he will lose against the US.
He will retreat to avoid an even bigger defeat.
Thugs I fought in my teenage years, even when they brought a knife to the fight, when they are afraid of getting KOed, and humiliated in front of their peers, they wrap up, and leave.
They don't want to get beaten up, risk humiliation, and potentially committing murder at the same time.
Similarly, US can give Russian state 2 choices, a defeat with orderly surrender, or end like Yugoslavia, but 10 times worse.
The replacement is already functional.
In fact, Russia is not the only one having built a replacement to protect against the risk that SWIFT would be sanctioned: Europe has done it too with Instex: https://instex-europe.com/about-us/
SWIFT is a private company; those sanctions make it less competitive, and it is hard to play whack-a-mole with a worldwide market.
SWIFT, to be fair, is very convenient because of its standards and high connectivity. But if SWIFT was sanctioned today, banks can use literally any mechanism to route funds, from SPFS to email. What matters is the recursive existence of accounts held at banks that have accounts held at banks.
https://www.npci.org.in/what-we-do/imps/product-overview
SWIFT is mostly about international settlement.
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.
The lesson was not lost on Russia or China and they have been building an alternative system called BRICS.
Edit: Here's a contemporary source[1] from a "reputable" newspaper. It doesn't mention SWIFT by name but that's what it was. There were other "reputable" sources covering the story more explicitly back in 2013 as well, but web search's extreme recency bias leaves me unable to find them. Perhaps visit your local university library and they can help you search the periodicals.
[1] https://www.washingtonpost.com/world/europe/pope-struggled-t...
There's a BRICS bank though.
> On 17 December 2012, the Pope received a report on "Vatican lobbies" ... . The same day, the Pope reportedly decided to resign, a decision he made public in February 2013
It's possible that multiple factors added up to make the job too overwhelming for one man of his age, but the "vatileaks" scandal appears to be far more significant in coverage from what I can see.
Certainly there are things that Russia has that the West needs. In addition, if Russians are generally used to less - and the West isn't - then again where is the pain? After two years of pandemic are most Americans up for this? Most importantly, how can this not influence the 2024 election?
Finally, I listened to (most of) Biden's speech yesterday and I was stunned by the irony. Per invasion Putin was effectively saying "Russia can't trust The West. They're out to get us" and Biden follows that with "Lookout Vlad...we're gonna put a hurting on Russia." Doesn't this validate Putin's narrative?
I understand...it's complicated. But it's also 2022, not 1952.
And yes, in the short term it will hurt us but in the longer term you are disarming the influence of a bad actor with the added benefit of incentivizing cleaner energy and perhaps more efficient means of transportation.
So if everyone loses, not just Russia, and relatively The West has more to lose, where is the pain for Russia?
We had Turkey a NATO member buy cheap fuel from ISIS in the past.
I have to take issue with this assumption. We've used such tactics against a number of previous bad actors, and yet those actors keep coming. The latest round (in this case against Russia) certainly wasn't a surprise about the sanctions, yes?
So again, back to my OP...Exactly how effective can we expect these sanctions to be if Russia knew they were coming and that threat didn't deter them? Who is actually feeling more pain?
The arc of my point is simple...Putin had a plan and we (and The West) led with our chin. What's our solution? "Print" more money? Let's not be naive, there are economic consequences to that here.
Russia is going nowhere. They are not NK. Consequences are never one sided, in a conflict, the other side gets a vote too.
All we are going to get is huge inflation and maybe a very marginal increase to the renewables time frame while we get a huge and costly headache in the short term.
Between those two (in-effect) statements, first from Putin, second from Biden, was Russia's/Putin's invasion of Ukraine. No irony there, just cause and effect.
https://archive.today/XqZzK
> When Western nations threatened Russia’s access to Swift in 2014, Alexei Kudrin, a onetime finance minister close to President Vladimir Putin, estimated that it could reduce Russia’s gross domestic product by 5% in a year. Cutting Russia off from Swift could have ramifications for other nations as well, since Russia is a key energy supplier to Europe and countries rely on the Swift system to pay for fuel. Russian officials have repeatedly denied assertions that they intend to invade Ukraine.
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?
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.
I'm trying to search for this, but I can't find anything about a 20 year validity.
Here for instances the information if the German Bundesbank, where you can still swap with the official rate of 1.95583 DM/€. https://www.bundesbank.de/de/aufgaben/bargeld/dm-banknoten-u... (Currently there is a restriction of in person service due to corona, but if you trust mail it works, else you have to wait for that Corona restriction to be lifted)
That exchange works without limits or anything.
This total sum seemed to be far beyond the robbers' actual intentions, and the Northern Bank quickly issued a new banknote design, offering free exchanges for anyone with the old one.
Of course the robbed money had serial numbers, so it's now generally believed the IRA just burned most of the stolen cash.
"Note that it is U.S. government policy that all designs of Federal Reserve notes remain legal tender, or legally valid for payments, regardless of when they were issued. This policy includes all denominations of Federal Reserve notes, from 1914 to present as per 31 U.S.C. § 5103." https://www.uscurrency.gov/acceptance-and-use-older-design-f...
Despite not being legal tender anymore, the Deutsche Bundesbank changes your DM notes, if they are after issued after 1948 (https://www.bundesbank.de/en/tasks/cash-management/dm-bankno...). The currency has been introduced in 1948.
If you feel inclined to do so, you can spend a 1 Yen note from 1885 https://en.wikipedia.org/wiki/Banknotes_of_the_Japanese_yen
So, inflation and wear and tear takes old notes out of circulation rather than expiry.
When people talk about the manual inefficiencies of finance, it's referring to all this happening in the backend behind the abstraction of quick/automated digital payments in fiat currency. It gets especially complex in international finance, hence SWIFT etc.
That is true, but arguably not a consequence of money being digital, but rather of fractional reserve banking.
Physical vs. digital accounting is largely orthogonal to full/fractional reserve banking.
These are contradictory. The banks with full reserve banking can't make loans from easily withdrawable deposits. They can do that only with term deposits that can't be withdrawn for a specific period
Is it still true though? The Fed averted this through QE by buying assets of questionable value at the face value from the illiquid banks and providing them with enough cash.. didn't they?
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 world can create dollars out of thin air given adequate collateral. Read about "Eurodollars".
This is true, but it's actually sort of a specious point. What a eurodollar deposit "really" is, is just a short contract. Your European bank takes your exchange and promises to give you back dollars when you ask for them. That they may not have them right now is just a technical detail. But the value of the dollar is still set by what the market is willing to pay for it. The bank going "short USD" is a risk it takes, not an inflationary pressure per se.
So... sure. Foreign banks can create dollars just like brokerages can "create stock shares"[1]. Except, they really can't. They're just playing accounting tricks.
[1] Or, more relevantly perhaps, how one crypto exchange can create wrapped tokens representing foreign coins. This capability was part of the exploit chain that led to the DeFi hack last month.
The contention upthread was that foreign banks could do the same thing to print dollars. And, again, it's complicated. They sorta can, but only in the sense of placing a gargantuan short bet on the dollar. (A ton of short selling on a small security can push the price down for the same reason). So no one does that, because no bank wants to play that kind of game (or is allowed: all those large foreign banks are themselves regulated by their own national regimes).
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 distributed ledger like Bitcoin is a completely unnecessary waste of resources.
it certainly is when it immediately de facto centralizes! which is in the event what has happened
In what respect? Hash power is well-distributed. Consensus (formal and informal) is working as expected.
Hating the way modern banking works doesn't mean blockchain is a flawless solution. It comes with a ton of its own problems (not the least of which being that it's utterly inscrutable to normies). I personally would prefer we go back to currency backed by gold or some other comparable commodity (silver, etc.)
Everyone who transacts in a fiat currency digitally has a defacto third (or more) party in the bank that mediates the transaction, and even non-digital cash transactions inherently include the central issuing bank (who you must trust not to debase the currency...just ask a Turkish citizen how that's going).
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.
I agree, but that's not always obvious at first glance. For example, I would've said Canada qualifies as a stable rule-of-law country with strong property rights up until a couple weeks ago.
Money is an IOU from the bank. So that's what all banks do. But they'll need assets on the right side of their balance sheet.
[citation needed]
"Whenever a bank makes a loan, it simultaneously creates a matching deposit in the borrower’s bank account, thereby creating new money."
So on the asset is a loan made by the bank.
https://fred.stlouisfed.org/series/BOGMBASE
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 before in human history. For thousands of years, currency was based upon various measures of value which attempted to be as objective as possible. Semi-rare materials (e.g. gold and silver) and difficult-to-replicate coinage were some examples. The US dollar was decoupled from the gold standard under the Nixon administration. The end result is, one dollar now holds value relative to the amount of dollars in existence. To increase the relative amount of precious metals into the world is relatively difficult (actual physical labor is required), but to increase the total amount of dollars in existence is as simple as updating a database entry.
If financial controls work exceedingly well, the current economic system is viable. 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 physical circumstances because then at least we have the option of controlling it to produce better outcomes even if we don't always succeed.
Following that logic, every country can simply print fiat money until everyone is rich.
This idea of commodity money is far detached from how it actually works. Thread has several good links if you want to learn how it actually works.
What is the reason behind so many people believing this? Do they teach it like this at school? (This resurfaces everytime money is discussed here)
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 FDIC in the US is just telling banks "sure, we'll insure your bank accounts, don't bother sending us verification, we trust you!"
Whenever you hear someone complain about onerous reporting requirements or other such business regulations, remember that those things get put in place to catch shit like this.
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).
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. '
Which does make one wonder how easy it'd be for your trick to work.
North Korea is a major printer of fake $100 bills, a piece of paper that's actually worthless but others are willing to trade $100 worth of goods and services, or exchange for a bank transfer. Until a bill is found to be fake and destroyed, I guess there really is $100 more in circulation, and when the last person found out the note is fake, in effect NK has robbed them out of $100.
The "single source of truth" is the Federal Reserve. Member banks (about 10,000 US domestic banks) can hold reserves directly at the Fed. Any reserve bank can directly transfer Fed reserves to another member bank or to the US Treasury using FedWire. The Fed "creates money" simply by crediting a member bank's reserve.
This is done in two ways, one is by paying interest on reserves. So if you're a member bank holding one million in reserves, the Fed simply bumps your balance up every night to reflect your interest payments. The other is by the Fed conducting "open market operations". When it wants to stimulate the economy by "providing liquidity" the NY Federal Reserve trading desk will buy treasury bonds and pay for them simply by crediting the balance of whichever member bank sold the bonds.
Member banks themselves can "create money" in the form of demand deposits. If you have one million in your checking account at Chase bank, all you really have is a promise by Chase bank to give you or whoever you want to send money to one million dollars. Essentially money is created the same way the Fed creates money, your checking account is nothing more than a credit in Chase's database.
However Chase's ability to create money is highly regulated and constrained. Banks have to conform to strict capital and leverage constraints. The OCC and other banking regulators will require that Chase hold enough assets in high enough quality to cover its deposit "liabilities". Some fraction of those assets will be dollars held as reserves at the Fed. Some will be bonds or loans, i.e. promises by other high-quality actors to pay dollars. Some of those assets could even be risky stocks, low quality bonds, commodities, etc. However the "risk-weighted" leverage ratio quickly scales up with risk.
In exchange for this regulation, deposits held at Chase or other member banks are treated as equivalent to Federal reserve dollars. That's because if for some reason, Chase is unable to pay back its depositors when they demand their money back, the Federal Reserve will "create money" to meet the obligations. This is essentially why bank runs no longer exist in modern banking.
Then there's the concept of "money markets", which is short-duration, high-quality assets that are essentially treated as "money-like". Often this tends to be short-term commercial paper from high-quality corporate issuers. A promise from Apple to pay $1.00 in 30 days is treated as "almost a dollar" by most of the market. In this sense, Apple can also "create money". But it's highly constrained, because it would quickly lose its credit rating or breach covenants in its longer-term bonds if it did so.
Finally there's the concepts of "eurodollar deposits". These are dollar deposits held at non-American banks but denominated in dollars. For example you could hold $1 million dollars at Mitsubishi bank in Japan, and you have a claim against Mitsubishi to pay out dollars whenever you want. Mitsubishi is not an American bank, and therefore is not directly regulated or insured by the Federal reserve. In some sense this makes eurodollars slightly less safe than dollars held at domestic member banks.
That being said Mitsubishi is regulated by Japanese banking regulations and implicitly insured by the BOJ (central bank of Japan). Mitsubishi will also make sure its dollar liabilities are never that large relative to its yen-assets. In the case of Mitsubishi failing, its highly likely the BOJ would bail them out by creating yen in the same way the Fed creates dollars. Some of that yen could be converted to dollars on the open FX market, and make the dollar depositors whole. Hence eurodollars are essentially just as safe as regular dollars as long as they're inside another high-quali...
This is not exactly true. Chase, like many other US banks, is regulated by the Fed, and deposits at Chase are insured by the FDIC (Federal Deposit Insurance Corporation). If Chase becomes insolvent, the FDIC will take over, pay depositors up to the FDIC insured maximum, and liquidate any Chase assets. The Fed is not required to do anything in such a situation.
The Fed may choose to conjure up some new money and loan that new money to Chase, and as Chase is a systemically important bank, the Fed might well do that before the FDIC steps in, but they are not required to.
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 bank could just increase that number to whatever they like. And say "Look, we own 100 Trillion USD. Now let's go shopping.".
They could, but these assets/liabilities would not be backed by any reserves linked to the USD payment rails.
Reserves are theoretically irrelevant (though practically regulated) as far as transfers between accounts of a single bank are concerned. But as soon as a second bank comes into the picture, i.e. for inter-bank transfers communicated via SWIFT or otherwise, all transfers will ultimately be backed by Fed account to Fed account transfers in the background.
> So I guess USD needs to be recognized by the US somehow?
Indirectly so, yes: What makes USD "real" is the ability to transact with the larger ecosystem of US and offshore banks that have a shared agreement on what "real" USD are.
Practically, this means being connected either directly (via a Fed account) or indirectly (via a bank that itself does have a Fed account) to that system.
> Could the US simply "void" all USD that are owned by Russia?
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).
In that case, why would the US have to act "indirectly", threatening bank A not to work with bank B? They could simply deny any transfers to and from bank B's account at the Feds, which would make any transactions impossible?
Yes, unless the banks have mutual accounts with each other that they can use to settle instead. So, if bank B is accepting to be owed money by bank A for any transfer from A to B, they don't need to settle – but there's practical limits to that, imposed by both risk and regulatory concerns. Eventually, they'll need to settle up if funds flows A -> B and B -> A don't largely cancel each other out.
> And is a transfer from A to B really a transfer from A's account at the Feds to B's?
For wire transfers and ACH, it is.
> They could simply deny any transfers to and from bank B's account at the Feds, which would make any transactions impossible?
Yes – that's in fact exactly what a freeze of that bank's Fed reserves is!
> unless the banks have mutual accounts with each other that they can use to settle instead.
So this is just based on trust that the other bank will keep a truthful score of the transfer, and there won't be a dispute at settlement time?
If the banks are often willing to trade with each other "on trust alone" like that, I suppose that shows why the Feds can't always directly block dollar transfers, but have to rely on threats of account freezes.
Exactly: Either there is trust (and external settlement is not required), or there isn't, in which case banks will usually only credit incoming transfers to their customers once the underlying funds have settled.
Practically, trust is a spectrum, and banks might only settle once the outstanding balance in either direction has become too large (that's then called "netting").
> If the banks are often willing to trade with each other "on trust alone" like that
Bank balances are ultimately only be useful to their accountholders if they can effect some payment with them. There is therefore also a spectrum of fungibility of USD balances.
If you think about it, what makes USD useful is the fact that they can be used to pay for imports from the largest economy in the world. Only very few US companies would be willing to trade with you when being paid in USD balances at some foreign bank that they can't, as one significant example, pay their taxes with.
They could also go much further. US has the power to force any bank that wants to transact in USD to freeze all Russian assets no matter the currency.
This is a very big stick.
Or do they have another way?
Blocking Swift access makes it very inconvenient for banks to perform international settlement, because banks today rely on automated Swift messages to coordinate such transfers. However, even before Swift, international transfers were possible: by phone or telex. The banks have to find other ways to communicate, which isn't easy in practice, but not impossible. The fact that Russia has its own Swift competitor, to which some international banks might switch over time, would probably help with that.
But by freezing bank accounts at the Fed, the actual settlements - the events at which money actually changes hands - could be prevented in the first place, no matter the way in which banks agreed over those settlements. Switching back to good old telex (or another financial communication network) wouldn't help in such a scenario. Banks would have to fall back to exchanging big suitcases of dollar bills, which obviously wouldn't practically work.
Because no bank would survive this, they would immediately cooperate when confronted with such a threat and freeze any Russian-held funds, even if those funds weren't actually held in USD in the first place and thus would theoretically be unaffected by the Fed account freeze.
But as a short-term measure, revoking SWIFT access is probably also somewhat effective. As you say, setting up alternatives is not impossible, but not easy either.
I don't really understand this distinction. But before I can ask a question, there are some points about my understanding of how payments work, so that you can verify me:
1. All payments, no matter which payment system, can be performed only between 2 bank accounts. In order to send or receive money I must have an account in a bank.
2. A bank is pretty much defined by regulations it must follow. Following these regulations gives a bank some amount of trust/authority to say that a given person/entity has that much money within this bank. This money don't necessarily have to be backed by anything, so, ultimately, "it's just a number".
3. All transfers in a given currency are directly or indirectly performed via central bank that emits this currency (or FRS in case of USD). This is the ultimate top-level ledger for transfers in this currency.
4. So, ultimately to transfer non-physical assets (i.e. fiat money) 2 authorities for a given currency (i.e. central banks, or banks that follow CB regulations) must communicate one to another that a given number is deducted from account X and added to an account Y. There's nothing more.
So, if money is just a number, "transferring" it is just a message. So why exactly SWIFT is a messaging system that doesn't transfer money, and how money is transferred, then? And what (in general terms) even are these messages SWIFT is needed for, that aren't money transfers?
That's why I consider the capability to settle the individual transfers to be more important than the capability to negotiate these transfers, and the time of settlement to be the actual time at which wealth is transferred. Before that moment, the transfer is effectively incomplete, which usually doesn't matter much for smaller sums of money, but in case of large amounts that introduce large imbalances between banks you can be pretty sure the banks will want to settle among each other first before the recipient gets full access to the transferred money.
However, all of this is based on the assumption that Swift is used for inter-bank communication as in "non-central-bank to non-central-bank". I always assumed that central banks would have their own communication channels with the non-central-banks and would not have to use some intermediary like Swift, as they themselves are a central entity able to standardize message formats and such.
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.
"I deem it legal to freeze assets of terrorists."
"I now deem you a terrorist."
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.
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 transfer times, and easy of payment... But it seems like tech build upon tech. centralized startups/companies owning payment systems (Apple Pay, Stripe, Adyen).... Man, i'm going to buy some more ETH :p
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.
[0] Including Ethereum.
Then you had to trust that they didn't hand you false coins. After that came false checks. Nowadays you need to trust that online shops aren't trying to scam you.
Essentially whenever you do business there will be one person that needs to make the first move, crypto or fiat, someone always needs to deliver first. But if these two business partners don't trust one another then they need a third party they can both trust.
In our world these are most often banks or notaries. People that will take money from person A hold it till person B delivers then pass it on. If person B doesn't deliver person A gets their money back, if person A doesn't pay person B doesn't deliver.
Now, crypto is trying to claim that smart contracts will solve this in crypto world but that raises the question of who executes these smart contracts and who feeds them information. After all this once again feeds back into the trust problem.
Essentially you need banks not because they are modern or technologically up to date or fast, but because they are in fact fully capable of clawing money back if the laws allow them to, unlike crypto where your money is secured by math.
Because even if some people don't like it, the chance of the average person being scammed is far higher than your bank or the government misusing the trust you have given them and taking your money.
Your internal balances are only good so long as the rest of the system trusts you. Magic up some fake balances and good luck getting the rest of the world to continue to take you seriously. "You want us to believe you've actually got that 100 Trillion? Show us?" How would this Russian bank spend these trillions? They can't cash out, because they don't actually have that much paper USD. Transfer it to another bank somewhere more reputable? How are you going to make those transfers clear?
I invite you to open your own bank and print yourself ten million dollars out of the air. Good luck converting that number to cash or transferring it to anywhere else!
Banks do their due diligence for a reason, but they don't always get it right. And a certain amount of "bad loans" is expected anyway. Part of the fees and interest they charge is to cover that.
But that's very different than simply printing yourself 10 million dollars. Or even just ten dollars.
It's also different from you starting a bank and saying you loan me 10 million dollars. I now have a statement saying I have 10M in your bank. I try to take that to a "real" bank to cash out. It's not gonna work.
You could start here: https://www.federalreserve.gov/releases/h41/20220224/
H.4.1 is a really useful and important data set. For example, you can see that US Fed is holding T2.7$ worth of mortgage backed securities i.e., it's funding them.
> Could the US simply "void" all USD that are owned by Russia?
Beyond a certain threshold those USDs are typically stored as US Treasury bills because it's too risky to deposit billions of $$ in bank accounts. The risk of bank going under is real at those deposit levels.
For anything more I highly recommend reading up Fed Guy blog [1]. It's one of the best sources of this information I've come across; he's extremely concise, no-jargon and explains the core principles really well.
While at it, take a look at this BIS data[2]. tl;dr Russian residents owe ~B121$ to other countries' banks.
[1] https://fedguy.com
[2] https://stats.bis.org/statx/srs/table/b4?c=RU
In a computer account. Here's a 22-second clip[0] from a 60-Minutes interview with a former chair of the Federal Reserve talking about how money is lent to banks. Literally just numbers on a computer.
"...We simply use the computer to mark up the size of the account that they have..."
[0]: https://www.youtube.com/watch?v=hiCs_YHlKSI
The key feature of this system (and what everyone is ignoring) is bank accounts that x/German bank has at y/Russia bank (this is also the actual means of transaction for SWIFT).
So in your example, 'y bank erroneously says we have $100tn' would actually just mean 'y bank is willing to credit the account of x bank by $100tn.'
If x bank then tried to pay y bank for a separate transaction with those fake $, then y bank is the loser anyway.
EDIT: Put alternatively, 'making up' USD is a near equivalent to making a loan, which is sort of the core thing a bank does anyway.
And yet people question the utility of a decentralized, trustless, public ledger -- ie. blockchain.
The country north of USA targeted a certain group and took their funds earlier this month. https://www.insurancejournal.com/news/international/2022/02/...
The US sanctions (freezing their US assets) has more effect, in that regard, than a SWIFT blockade. The US seems to be the interested party in this war, and Germany is much less enthusiastic about it. Remember, SWIFT is a Belgium company and the US has been hostile to European financial institutions lately.
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 the end (modulo interest, defaults, etc).
As an aside, that’s why low interest rates stimulate the economy: more loans are made, and more money is created, spurring more economic activity.
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.
And while that is indeed technically true, it only applies to money withdrawn as banknotes. Given that most of the economy is electronic transactions, that loan is to all extents and purposes real money created by the bank out of thin air (modulo capital requirements to back debt).
Only the Federal Reserve can create truly unlimited amounts of money without the risk that customers might request transfers that exhaust their reserves.
Complying with reserve requirements imposed by the Federal Reserve on banks help to mitigate this risk, but they are not the true restriction. Even if the reserve requirement was zero, banks would need to keep some reserves or they would be completely unable to fulfil requests to transfer funds to other banks. And even if a bank exceeded the reserve requirement, for example by keeping 50% reserves rather than 10%, they would be insolvent if customers requested 51% of balances transferred out and were unable to cover it with loans from other banks.
Yeah, they can, and do. This is what Eurodollars are. And why the World is continually on the brink of financial collapse whenever Dollars get too scarce.
It's a distributed shared ledger.
If this hypothetical Russian bank attempts to add fraud to the ledger, it will cause a fork.
A bank could easily create fake money into its own accounts, but it would have trouble transferring that money over to other banks. I wrote extensively about this topic here: https://www.attejuvonen.fi/money-out-of-thin-air/
In fact, isn't that indistinguishable (mathematically) from paying interest? The bank's internal accounts all go from X to Y. In theory, the bank should made more money that that in total, so at any given point the sum of all accounts is less than the banks money and accounts recieveable (usually via loans). And the bank can provide that money to other people if needed. But if a bank paid 1000% APR on savings accounts, all that would happen is the bank goes belly up and a lot of those accounts won't be worth the numbers they claim to have.
To fake money you need to forge transaction with input from somewhere, this can be checked.
Slightly related, I'd have to find it again, but I recall there was at some point an assembly level hack on some Oracle database holding core banking in one country.
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.
I feel these sanctions are still more of signalling, than actually doing something useful to help Ukraine.
Russia has elections, but even having an unelected autocrat doesn't mean that governments are immune to popular opinion.
Ask Louis XVI of France or, perhaps more relevantly here, Tsar Nicholas II of all the Russias.
And yes I agree popular uprisings is a possibility. But in the case of Germany in 1930-1940s that didn't quite work.
We have a word for this: https://en.wikipedia.org/wiki/Appeasement
Neville Chamberlain negotiated with Hitler over handing Germany large swaths of Czech territory critical for border defense. The Czechs weren't invited to the conversation.
https://en.wikipedia.org/wiki/Peace_for_our_time
We know how that turned out.
While relatively late in the war so it didn't have too much strategic impact, the Nazis literally invented the supersonic missile.
At some point you have to just call their bluff. Earlier is better than later. Putin himself knows that he'll be the first casualty in nuclear war, and I doubt very much that Putin's deputies would go along with a plan that results in the annihilation of the Russian people. He's playing a high-stakes game of chicken.
Putin is gambling that the west is too cowardly to fight, and so far he's right. Hitler made the same gamble in 1936.
The lesson here is that every country should learn to defend itself.
Russia's neighbors want in to be protected from war, but there is no way in without starting a war.
If the West really cared Swift would have happened long ago.
The reality is they do not care for Ukraine.
I've been thinking about this all day and feel incredibly upset when I see what's going on.
What can we do? Have you seen what the Russians did to Grozny?
It all boils down to the fact that EU simply can't start a war with a maniac that has thousands of nukes. I'd say let him have it and Ukrainians refugees are welcome here by the millions.
Putin's now threatening Finland and Sweden should they dare join NATO and there's talk of the conflict spilling over in to Moldova and Georgia. That would change things drastically. As soon as EU or US forces take military action against Russia we have to assume he'll retaliate and then it's basically WW3. If that's what it takes to get rid of this maniac then so be it but the consequences for everyone will be severe.
do you have a link i can read up on? I would imagine everyone is running to the safety of NATO now and i can totally see Putin saying "if you try then you're next".
> ...then it's basically WW3. If that's what it takes to get rid of this maniac then so be it but the consequences for everyone will be severe.
"severe" would be the mildest term possible to describe what would happen heh
https://www.newsweek.com/russia-threatens-finland-sweden-nat...
Sweden and Finland probably don't feel the need to join Nato but the threat that was made is enough to put EU on edge. Scandinavia is much "closer" than Ukraine.
Severe indeed.
The facts support that interpretation. USA withdrew troops two weeks ago, which signaled to Russia they could move in.
https://www.trtworld.com/americas/us-withdraws-nearly-all-re... ' US withdraws nearly all remaining troops from Ukraine '
1: https://twitter.com/Cernovich/status/1496917092351692810
Trump is saying that NATO shouldn't exist because of this intertwinement, and there's a sentiment going around that NATO caused the conflict by existing and forcing Putin's hand. Saying things like "the purpose of NATO is contradicted" plays into that narrative.
He even planned on withdrawing from NATO in his second term, had he won the election: https://www.independent.co.uk/news/world/americas/us-politic...
Anyway, gas consumption as a percentage of the total mix has been stable since before the start of the Energiewende. [1] Germany replaced some coal and nuclear with renewables and kept the rest stable while also substantially increasing total energy demand.
Since your are quoting one of the worst people I've ever had the displeasure of having to listen to, it is curious that you ignore that the US is a major importer of russian resources, too, and is now silent now about boycotting russian imports. [2] It was all fun and games when the trade-off was that Germany would have to import expensive American natural gas, but biting in the sour apple yourself doesn't seem to be on the table, at least for now.
[0] https://tradingeconomics.com/russia/exports/germany/mineral-...
[1] https://www.cleanenergywire.org/factsheets/germanys-energy-c...
[2] https://www.spglobal.com/platts/en/market-insights/latest-ne...
U.S. is not a major importer of Russian energy. U.S. is a net exporter of natural gas.[2]. Foreign imports for energy fell 30% under the previous admin [1].
Russia only accounts for 6.6% of our foreign imports [1]. And foreign imports have become less important for the U.S. as it has become a net exporter of oil & gas [3].
Under previous admin, our natural gas exports doubled [2].
[1] https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=M... [2] https://www.eia.gov/energyexplained/natural-gas/imports-and-... [3] https://dailyenergyinsider.com/news/29194-united-states-expo... [4] https://www.euractiv.com/section/energy/news/macron-presents...
In my understanding, it wouldn’t change much for the natural gas portion, because that can’t be replaced by electricity for the most part (heating).
Here a staggering number of people die every winter due to not being able to afford heating[0] (something like 30-50k). I think it's not quite so bad in other EU countries but some (like Germany) are still extremely reliant on Russia for energy. Due to strategic shortsightedness, cutting off oil and gas exports is simply not an option.
[0]: https://www.theguardian.com/commentisfree/2020/feb/27/dying-...
In that moment, it really clicked for me how much normal people are pawns to be used in much larger games. And there apparently is no morality when dealing with pawns, unless it is convenient.
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.
https://www.cnn.com/videos/world/2022/02/25/petro-poroshenko...
I recall seeing an image of Zelensky carrying a rifle and wearing tactical gear but can't find it, maybe I misremembered that. He is in Kyiv though, unless he shot this video and left immediately: https://www.nytimes.com/2022/02/25/world/europe/ukraine-zele...
Which country has it ever worked out on? Cuba? Venezuela? North Korea?
None of them have turned on their dictators. Rather, they are living life in misery. What is worse is they have been not just cut off monetarily from the rest of the World, the dictators have made sure to censor all content coming into the country. So they have no idea (or worse: false propaganda) of what is going on outside their territory.
I haven't seen sanctions actually work in even one case (will be happy to correct myself if there has been a case where sanctions actually worked). Where people fought back against the dictator and established democratic rule. Even if there were popular uprisings it has lead to establishment of even more autocratic rulers or worse, control by militias/warlords or terror groups.
"Economic sanctions against South Africa placed a significant pressure on the government that helped to end apartheid."
[0] https://en.wikipedia.org/wiki/International_sanctions_during...
I don't think in any of the countries you list there's popular support of the leadership.
Cuba has higher life expectancy and a lower infant mortality rate than the USA. I think it is a mistake to lump it in with Venezuela or North Korea.
Modern warfare also affects poor people more than it affects the rich — children of Russian oligarchs are off in New York and London, not fighting on the battlefields.
But the sanctions are very much meant to stop Russia's invasion of Ukraine, and to disintentivise Russia from invading other sovereign nations. Only Russians can stop this aggression.
Oh, and c) are there any other knobs to adjust Russian foreign policy?
If you make transfers, it may be temporarily interrupted or slower while your bank shifts their integrations. They plausibly have either accounts at the ECB, or relations to a bank that does.
There may be KYC hurdles to opening a EUR account online.
Not to sound disrespectful, but I think it's the Ukrainian citizens who perished or will perish who "will be hit hardest".
I know you have no personal choice in the matter, but still important to keep in mind the ongoing suffering.
Since the idea is to get governments to change their behavior and being overthrown is just one of the extreme tail risks that play in to motivating that behavioral change, that's neither surprising nor inconsistent with sanctions working.
[0] https://www.jstor.org/stable/3647732
I don't really care much about the state of Russia, and maybe, just maybe the sanctions will have some positive effect; just wanted to say that "most Russians support war" is a very shabby argument in support of approving of punishing "most Russians".
People will be “cheaper” buy. Votes will be cheaper. It only helps consolidate the wealth in the target country and makes the massez more reliant on large institutions and wealthy individuals.
I wish you best of luck in dealing with things to coms brother.
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 states it perceived as even remotely objective to US interests. Is your president elect too socialist? you get an aircraft carrier floating in your strait for a year. did you nationalize your oil fields? sanctions mean you cant sell it to anyone. Cuba to this day still enjoys endless sanctions for resisting regime change.
in 2022 sanctions are to international diplomacy as a tantrum is to a toddler. theyre effectively meaningless as most capable, observant countries have managed to sidestep in part or in whole the once dominant US hegemony of finance and trade. even the threat of a blue-water naval presence is an unspeakable taboo as Russia is one of a handful of emerging countries you wouldnt dare send an aircraft carrier to patrol, unless its goal was to secure the ocean floor.
The only meaningful threat SWIFT offers is the ability to assuage short-term market fears among traders that dont fully understand just how inapplicable SWIFT is in this case.
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/status/1496799227082649603
The US benefits enormously from owning the reserve currency and running the world financial system, and the ultimate effect of our trigger-happy approach to sanctions is to push countries away from those, especially with the US becoming a smaller percent of the world economy every year. Even the Europeans are sick of it. The Europeans only play along still because they are militarily dependent on the US, in part because their populations have, under the comfort of the US security umbrella, developed irrational political beliefs against building up their own militaries.
That seems belied by actual history. The US has been a "trigger happy" sanctioner for basically the entirety of the post-war era, and the dollar has been dominant throughout. What would change now that didn't when we sanctioned Iran, or Iraq, or Cuba, or Yugoslavia, or...
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.
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.
Even experts cite each other.
This is only true to the extent that the US unilaterally imposes sanctions. The proposed sanctions involving SWIFT are multilateral, with the support of the entire EU. That's around double the economic power of the US alone, and roughly half of the entire world's GDP. Being sanctioned by half of the global economy (more, if Asian democracies participate) is very punishing indeed.
Sure, the US is historically (recent) more happy to go into conflicts around the world, but this is a conflict bordering many EU states. The Baltics, Poland, Slovakia, Hungary, Romania definitely aren't happy seeing Putin on their doorsteps.
That's enough to send two warheads to every single city with over 100k population in Russia and then there would be the Russian retaliation...
the consternation im still faced with is "with the support of the entire EU." It may be difficult to secure a resounding vote with the bemoaned sword of Damocles. much heating fuel comes from Russia in the dead of winter.
still other HN posters make a great point (and in other posts too) that every time SWIFT is disconnected, it popularizes alternate markets at the expense of US and EU interest. certainly a stronger SPFS must be taken into account.
In fact, China has stepped up their efforts to aid Russia.
The next few weeks will be history in the making. Pay attention.
Unlike Russia's allies other than China, India cannot afford to be shut out of the US and supported by Russia, and unlike China, Europe and the US can impose fairly strict sanctions on India in the short-term.
This same situation happened with Iran and it torpedoed their economy.
I mean, I suspect we agree that the embargo should be lifted, but that's a really poor way of saying "communist dictatorship with a penchant for, among other things, lining up homosexuals against a wall and shooting them".
Hopefully the last few days have reinforced that even if one country does things wrong sometimes, it doesn't mean the other side is a good guy.
Earlier today a report on BBC said existing sanctions on Russian already made their economy suffer to a significant extent. I forgot the percentage points they mentioned but it was surprisingly high. Applying even more sanctions will unfortunately hurt the Russian people the most and the discontent that will create among the people over the many years to come should not be underestimated.
I don't see how this follows from your (correct) description of US influence in the cold war. Soft power works now the same way it always has, all it requires is coordination on a "pool of influence" large enough. It's absolutely true that the US can't unilaterally do what it did in the 70's. But the e.g. USA+EU+Japan+Korea? That's pretty dominant, still.
Russia's only out from something like that would effectively mean becoming a sattelite state to the PRC. And... maybe that's where we're headed. But it's surely not where Putin wants to head, so it remains leverage.
This is just straight up wrong. This is why the Magnitsky Act got Putin so rattled. It is also why Putin has said being cut off from swift is an act of war. If it's meaningless, why does Russia care so much?
In this case, though, one wants to apply pressure not on the country, but on the surrounding oligarchs. When a nation is, essentially, a syndicate of organized criminal oligarchs around a strongman, financial pressure on those people is exactly what you need.
In my mind that would cause the populace to be more frustrated with Putin for what he's done.
I'm thinking especially of people in Europe castigating politicians for not wanting to clamp down hard on the Russian energy sector. The way I see it, the europols are in a no-win situation. If they go easy on Russia and keep the gas and oil flowing, they look like weak and waffling appeasers, which yes, they are. If they cut off the Russian gas supply, will the people posting Ukrainian flags on Twitter remember or care about the noble root causes when faced with unprecedented energy prices?
I.e. the politicians know their people better than they know themselves, and they're well aware that showing support on social media is one thing, but being asked to make drastic sacrifices is quite another. These politicians will not survive if they do what their voters are clamoring for them to do.
Of course, they probably wouldn't be in this position if they hadn't taken energy strategy advice from Greta Thunberg, but that's neither here nor there.
What the fuck? I'm pretty positive that the energy strategy of major western powers was not radically revamped in two years on the advice of a teenager. If anything, they're in this position because they pursued an opposite strategy to what ecologists advocate: reduce dependency on fossil fuels including Russian natural gas, and invest massively in renewables + nuclear to bridge the gap.
I can't comment on whether Greta Thunberg had anything to do with that, but I do see in a recent article that she appears to be anti-nuclear: https://www.theguardian.com/world/2021/dec/21/eu-in-row-over...
Bringing Thunberg into this discussion serves no purpose except making conservatives giggle because they love hating her. She had nothing to with the decision, and being anti-nuclear isn’t what she’s known for.
Northstream 2 was, indeed, a terrible idea. But it never became operational and therefore does not affect the current situation.
Did Russia have some involvement in Germany's nuclear power infrastructure? I'm not aware of that, but interested to know more.
Bringing Thunberg into this discussion serves no purpose except making conservatives giggle because they love hating her. She had nothing to with the decision, and being anti-nuclear isn’t what she’s known for.
Sure, it was probably a bit forced. I wouldn't have chosen to bring her up. Either way, her anti-nuclear stance is now a relatively widely publicized recent event; I don't see that GP did something particularly wrong in referencing it.
Northstream 2 was, indeed, a terrible idea. But it never became operational and therefore does not affect the current situation.
Huh? It's directly related to the current situation.
https://twitter.com/IchBin_RO/status/1497274721418760193
If you are pro-SWIFT-exclusion-of-Russia and live in Germany please contact your national representatives and let them know you're willing to bear some hardship so others don't have to.
For people living somewhere out rural shthole in West Germany perhaps might be triggered enough to file a report with the myriad of administrative concerns available to the spoiled citizen
Then call and email your feckless MdB.
It would be even possible to trade a fleet of AMGs for a week of oil if need be. Removing SWIFT would only delay trade between Russia and Germany not hinder it in anyway.
In fact bartering system would produce more efficiencies, a bullet proof AMG G-wagon for instance would fetch more oil than a regular C-class offered to Putin's low ranking officers!
All in all, Ukraine gains nothing from this action, it would only give Putin the political ammunition to sell the narrative that Russia is under attack.
The US certainly stands to gain everything and risk nothing in this region and its puzzling to me why Ukraine would choose this as a hill to die on as if their self sacrifice would move the hearts and minds of NATO officers on some emotional basis
Russia, meanwhile, would be bankrupt within a few months.
And remember that Bitcoin has a fascinating property here-- the more demand there is for transactions on it, the better it gets at scaling for something approaching SWIFT level of transactions.
Oh wait I'm thinking of Bittorrent's scaling wrt popular torrents. Yeah, Bitcoin's ability to scale is complete shit.
I think Putin means to hold out economically as long as possible and give other countries a chance to adopt this financial network and eventually get to a point where Russia doesn't need to play by the West's rules anymore, because sanctions will have a diminished effect.
The potential for bad consequences for Russia in the months ahead depends to a large degree on how China reacts.
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 support it willfully (in opposition to Bitcoin) thanks to several years of anti-Russia propaganda. It's a perfect mousetrap.
All Russia has to do is tell European countries reliant on its energy exports that they'll only be accepting Bitcoin moving forward. This would force those countries to scramble to get Bitcoin (if they don't have it already), forcing the price up rapidly.