THE COMING MULTI-POLAR WORLD OF FINANCIAL CLEARING?
Today's blog is about a thought-provoking article at Zero Hedge that was noticed and passed along by E.G. (and thank you for doing so!) As always, it provokes a bit of my own high octane speculation by extension of an idea. The article, in short, deals with the ramifications of the weaponization of SWIFT, the Society for World-wide Interbank Financial Telecommunication:
The thesis of the article is relatively simple: As the title of SWIFT indicates, it is essentially a centralized monopolistic system for international financial clearing. What happens, however, when that supposedly neutral centralized system is suddenly weaponized to force its participants into adopting policies they otherwise might not?
In fact, until a few years ago, SWIFT had no competition. And, one could argue, and in fact Sinclair did at the time, SWIFT needs no competition. This is why SWIFT expulsion was such a big deal for anyone threatened with it. The idea that anyone would ever use it as a weapon to enforce domestic policy and as a tool of diplomacy and hybrid war was unthinkable because it would begin a financial arms race no one should want to pursue.
But with its monopoly and this inertia dominating, the Swiss were left flat-footed when this happened.
The fact that the Obama administration politicized SWIFT when it did ended an era of international finance. The world financial system ended any illusions it had over who was in charge and who dictated what terms.
The problem with that is once you go there, there’s no going back, which was Sinclair’s point over a decade ago.
Threatening Switzerland with SWIFT expulsion wasn’t a sign of strength, however, it was a sign of weakness. Only weak people bully their friends into submission. It showed that the U.S. had no leverage over than the Swiss other than SWIFT, a clear sign of desperation.
And that’s what the U.S. did when it pushed the big red ‘history eraser’ button.
The Swiss knuckled under. Its vaunted banking privacy is now a part of history.
But the fallout from this action, as I've blogged about before, was that other countries - Russia for example - simply built out their own systems of financial clearing:
In fact, if you didn’t think that the Russia/China/Iran axis weren’t preparing for this outcome you would either be terminally naïve or a member of John Kerry’s Think Tank on K street. There is a desperation to this type of resolution that is hard to ignore.
Because Europe, as a major energy importer, could never survive shutting off access to Russian energy. That would truly be cutting off one’s nose to spite one’s face. It would either send Europe into a dark age or end SWIFT as the fulcrum on which global trade rests.
In fact, if Russia was cut out from the SWIFT system their next move would be to demand all payments for their energy through their own version of SWIFT, which is now fully functional. It would be an ‘act of war.’ That this resolution passed with just 67 against it tells me it has broad backing within the EU parliament of those in the pay of both George Soros’ Open Society Foundation and the World Economic Forum.
In other words, the politicization and weaponization of SWIFT only ended its international clearing monopoly as others built their own systems. After all - and as the article mentions repeatedly - such clearing systems are "just code," and anyone with expertise in the subject could, on paper at least, build a system of financial clearing. As I pointed out some years ago, when Russia was threatened with expulsion from SWIFT, not only did it begin to build its own system, but in the interim, Japan extended to Russia the use of its own credit card clearing systems in wide use in the Pacific. Japan, in other words, has coders. Good ones. And Japan's action was a little "message" that it could turn that system into a financial clearing system relatively easily.
And the problem is, there is no lack of people that are familiar with code.
And this brings me to today's high octane speculation. In recent months we've seen a spate of American states passing various nullification laws in anticipation of federal overreach by the Bidenenko regime. Coupled with these measures, some states have already passed, or are in the process of passing, state laws recognizing bullion coins as legal tender, and as most regular readers here are aware, Texas has passed its own state bullion depository law.
The problem is that domestically within the USA there is yet another "monopolistic", or at least highly centralized system, the Clearing House Interbank Payments System, or "CHIPS" to give it its acronym. The implication, it seems to me, is clear, for if those states passing nullification laws expect them to have any teeth, then not only will they have to put their state accounts in banks not beholden to the major banking players, but they will also inevitably have to enact some sort of clearing system as a competitor to CHIPS, for if SWIFT can be politicized and weaponized, so can CHIPS.
And while we're pondering what I'm calling the "emerging multi-polar world of financial clearing," one might ponder further possible emergent implications: why should such systems be restricted to nation-states (Russia), or ostensibly hiding behind a "monopolistic neutrality" such as SWIFT? The bankers on the Rialto in Venice basically were running international clearing, and there were several of them; Venice itself, however, had no such monopoly; it was one among many.
I suspect, in other words, that we've yet to see the end of the "emergent multi-polar world of financial clearing." I think it is a trend that could continue, especially of those American states involved in nullification efforts wake up and realize that they will need such systems of clearing. It brings me back to the strange death of Shuvro Biswas, the young coder who prior to his death was involved in AI and security systems... for financial clearing...
But there is some good news... after all, as the article maintains, it's just code...
See you on the flip side...
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