SWIFT
The Russian invasion of Ukraine and the resulting sanctions from NATO and Russia upon each other risk driving up energy prices. Kicking Russia from SWIFT could even end the dollar as the world’s reserve currency. There are already bank runs.
SWIFT is the Society for Worldwide Interbank Financial Telecommunication. It is basically the computer program that allows people to trade US dollars internationally. It is controlled by the USA.
According to Business Insider,[1]
“Think of SWIFT as Gmail for banks. Or like SMS, but for money transfers.
In short, SWIFT is a messaging system for money transfers.”
On February 22, 2022, NATO nations jointly stated that they were thinking about kicking Russia and Russian banks from SWIFT.[2]
“We, the leaders of the European Commission, France, Germany, Italy, the United Kingdom, Canada, and the United States condemn Putin’s war of choice and attacks on the sovereign nation and people of Ukraine…
[…]
First, we commit to ensuring that selected Russian banks are removed from the SWIFT messaging system. This will ensure that these banks are disconnected from the international financial system and harm their ability to operate globally.
Second, we commit to imposing restrictive measures that will prevent the Russian Central Bank from deploying its international reserves in ways that undermine the impact of our sanctions.”
On February 24, Russia invaded Ukraine.
Russia trades their energy commodities to NATO nations for dollars via SWIFT. The entire basis of the dollar as the world’s reserve currency post 1971 is that it is (almost) exclusively used to buy oil and energy commodities (petro-dollar). If trading in dollars becomes less useful than trading in Euros or Rubles, then European countries will have less need for dollars which will drive up dollar prices too. Cutting Russia off from SWIFT thus hurts the dollar too while inflation is already a concern. [3][4]
According to Reuters,[5]
“Russia produces 10% of global oil and supplies 40% of Europe's gas. It is the world's largest grains and fertilisers exporter, top palladium and nickel producer, third-largest exporter of coal and steel, and fifth-largest wood exporter.”
Russia is/will respond with their own sanctions. That is bad for our fractional reserve banking system. Banks are only required to keep a fraction of the money that they claim to have on deposit. Accordingly, there are currently bank/ATM runs in Ukraine, Poland, and Russia as people fear disruptions to their banking services from the war and sanctions.[6-9]
The Polish National Bank, Narodowy Bank Polski, stated (via google translate),[10]
“Due to the increased demand for cash, Narodowy Bank Polski informs that it has sufficient reserves to fully cover the demand of bank customers for cash. All bank orders are carried out without value limits, in the full nominal structure, throughout the country.
Narodowy Bank Polski is in close cooperation with all entities servicing the cash market in Poland. Due to the increased scale of transactions, in some locations there may be delays in the delivery of cash to ATMs from the logistic centers of commercial banks and cash handling companies.”
The dollar has been the safe haven asset of the last half century. If Europeans try to withdraw dollars from their banks/ATMs or convert their Euros or Rubles into dollars and there are not enough physical dollars, then the bank runs could spread to the USA too. The everything bubble in the dollar market just needs a pin to prick it. Debt defaults resulting from a run on the banking system would do that. We are not yet a cashless society.
“The most significant threat to our national security is our debt.”
-Chairman of the Joint Chiefs of Staff, Admiral Mike Mullen speaking with CNN, August 25, 2010
Gold is money by debt default. Putin lived through the economic collapse of the Soviet Union. Looking at the collapse of Socialism in the USA, is it any wonder that Russia has been increasingly buying gold since the ‘08 Crisis and the conflict in Ukraine began back in 2014?[11]
The Russian invasion of Ukraine and the resulting sanctions from NATO and Russia upon each other risk driving up energy prices. Kicking Russia from SWIFT could even end the dollar as the world’s reserve currency. There are already bank runs.
[3]https://www.hamiltonmobley.com/blog/r9tu385c22azkxuycdia7o3kludljh?rq=petro%20dollar
[6]https://www.zerohedge.com/markets/im-shock-russians-scramble-pull-money-atms-bank-runs-begin
[8]https://www.hamiltonmobley.com/blog/y8rzo00zq70icyksbzwtypnrsf9a1a
[9]https://www.hamiltonmobley.com/blog/fractional-reserve-banking
[10]https://www.nbp.pl/home.aspx?f=/aktualnosci/wiadomosci_2022/25022022.html