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This was a predictable outcome. Cutting off SWIFT access forced Russia to CIPS. Where does this lead? Strengthening CIPS with this move surely weakens the dolla

This was a predictable outcome. Cutting off SWIFT access forced Russia to CIPS. Where does this lead? Strengthening CIPS with this move surely weakens the dollar's reserve status globally.

drumhead 5y ago
Which system would you trust? SWIFT or something controlled by China? I have a feeling the China based system would be used far more often politically than SWIFT ever would, especially against those that China deemed to be problematic to them.
- hunglee2 5y ago
  it won't be a matter of trusting one over the other; smart thing banks will do is register accounts with as many payments systems as are available, in order to mitigate unforeseen future risk.
  - Aperocky 5y ago
    Right, people here seem to think it's putting money into SWIFT or some alternative system. SWIFT doesn't hold or keep money, it just process them.
    - hunglee2 5y ago
      that's right, its a bank to bank messaging service. Significant mainly because its a monopoly but totally replicable, just no one has really had much reason to. Though US sanctioning targeted states has made more countries aware of the vulnerability. This episode will see a mushrooming of alts as each significant economy builds at least a failsafe - failure to do is would be gross dereliction of duty at this point
- nemothekid 5y ago
  >especially against those that China deemed to be problematic to them. I don’t see how this is any different than what the US has already done. The US has now cut off Iran and Russia from SWIFT in political moves. Any nation state is likely already doing the calculus.
  - learc83 5y ago
    The difference is China would likely cut off banks and countries who “hurt the feelings of the Chinese people”, i.e., refer to Taiwan as a country, or refuse to recognize the 9-dash line, or comment on their human rights abuses.
tiahura 5y ago
Mostly it just accelerates Russia’s slide into becoming North Mongolia.
DrBazza 5y ago
The dollar is free floating, and the renminmbi/yuan is pegged. I wouldn't worry about the dollar losing its status any time soon. https://en.wikipedia.org/wiki/Renminbi#Managed_float https://en.wikipedia.org/wiki/Renminbi#Managed_float https://en.wikipedia.org/wiki/Renminbi_currency_value#International_consequences https://en.wikipedia.org/wiki/Renminbi_currency_value#Intern... https://en.wikipedia.org/wiki/European_Exchange_Rate_Mechanism#Pound_sterling's_forced_withdrawal_from_the_ERM https://en.wikipedia.org/wiki/European_Exchange_Rate_Mechani...
- allisdust 5y ago
  The peg is only to keep it from strengthening (unlike some countries that try to keep their currency from sinking). Depending on which country is trying to use yuan as a reserve currency (export based economies vs import based ones), they might actually find this feature useful to stay competitive.
  - mensetmanusman 5y ago
    The peg is a subsidy for the world. I.e. those working under that currency regime should be making more money and have higher purchasing power. If the population was educated enough to know they were being stolen from, ‘Office Space’-style, they would throw their leaders out. This is one reason the great firewall of China is so important, and I expect Russia to embrace that umbrella soon.
    - berdario 5y ago
      > If the population was educated enough to know they were being stolen from... This is basically the same argument used by cryptobros and libertarians to criticize inflation. I think there are pretty obvious tradeoffs with letting your currency amass purchasing power: probably it would shrink the amount of exports (which means that a lot of people might find themselves without a job) and it would make it harder to get a mortgage. How do you propose that these negative effects would be mitigated?
    - allisdust 5y ago
adventured 5y ago
> Strengthening CIPS with this move surely weakens the dollar's reserve status globally. No it doesn't. That's a fantasy held primarily by people that dislike the US, the present world order, and want it all rearranged to their bias. You can instantly spot a person's bias by how quickly they whip out the premise that the USD global reserve is going to be damaged by xyz (it seems to practically be a fetish for some people). Typically there's no actual argument presented, just a statement that of course xyz will happen now, finally. You'll see that throughout the Russia war threads (here or elsewhere). Throughout my lifetime I've seen it repeatedly claimed: well of course, now the USD global reserve standard will begin to decline (the Euro was supposed to severely damage it; whoops). The vast majority of the world isn't going to have a strong interest in holding Yuan and that'll define the global reserve status. There are no other major competitors to the USD other than potentially the Yuan, and it's not a serious competitor because of the nature of the CCP. As it is, the Yuan has a smaller presence globally than the Yen and that says a lot given the size of China's economy (ie there's no trust in China and they haven't made much progress in that respect over the past decade).
- eleitl 5y ago
  Dedollarization in global settlements is empirically a historic trend though. At least until 2020.
- csomar 5y ago
  > says a lot given the size of China's economy (ie there's no trust in China and they haven't made much progress in that respect over the past decade). Yeah. I really wonder about this: The Chinese are doing everything possible to undermine their Yuan as a reserve currency. You can't freely move money. You can't open a Yuan denominated bank account easily. Their cards are hard to get/use (although some places are opening up). They didn't make a Stripe/Processing equivalent and open it to the rest of the world. You can't incorporate a Chinese company online and opening a Chinese company is a ridiculous process. English is still not widely used. And has anybody checked the ICBC online-banking solution? These guys are still living in the 90s? Most people think China is advanced in payments because they have wepay. But they seem to have just that and everything else (under State control) is still in the Soviet Era.
mvc 5y ago
I think the dollar has never looked better actually. Who from "the West" is going to consider major investments in China now? If by some miracle you manage to keep your IP secure, you risk losing your entire investment if/when the world gets tired of their support for the facists in Russia. [edit] since I wrote this comment.... https://twitter.com/jakluge/status/1499373653372420099 https://twitter.com/jakluge/status/1499373653372420099
- nemothekid 5y ago
  >Who from "the West" is going to consider major investments in China now? People have been saying this for more than 10 years. As long as interest rates remain low and China continues to grow, there will be plenty of western money flowing in.
  - mvc 5y ago
    > People have been saying this for more than 10 years. double-digit growth is great until it ends in zero.
- deleted 5y ago
  [deleted]
- Aperocky 5y ago
  Tesla sold almost as many cars in China as it did in US in 2021. Meanwhile Gigafactory Shanghai produced almost half of all Teslas globally. Who? Those who want to make money.
  - mvc 5y ago
    We'll see. I myself was sceptical of anti-china propoganda I'd seen until a few days ago and understood why business might think they can work within that environment. But everyone is showing their hands now. And at the moment, it sure looks like China is supporting a dictator on the march to a major war. Trillion dollar funds are writing off their Russian investments at the moment. How long before China is seen in the same way?
  - 5y ago
JumpCrisscross 5y ago
> Where does this lead? Strengthening CIPS with this move surely weakens the dollar's reserve status globally This was an unstated policy goal. Russia as a regional power is provably dangerous. As a Chinese vassal, at least it’s contained. Add to that the significant costs to the American economy dollar hegemony has brought [1], and this is broadly a win-win-win. [1] https://www.wsj.com/amp/articles/how-the-reserve-dollar-harms-america-1416527644 https://www.wsj.com/amp/articles/how-the-reserve-dollar-harm...
thereddaikon 5y ago
The world is quickly moving back to a bipolar arrangement. Having a unipolar world was nice while it lasted but was unlikely to last forever.
xadhominemx 5y ago
Chinese banks still need SWIFT, and if we find any Chinese banks using CIPS to do business with sanctioned Russian entities, they will get cut off too and now both Chinese and Russian banks will be screwed.
- hackerfromthefu 5y ago
  Wouldn't this just be done with an intermediary? Russian bank -> disposable temporary bank -> permanent chinese bank That way the disposable temporary bank is the one that's blacklisted, while the permanent one never did business with the sanctioned entity (directly).
  - xadhominemx 5y ago
    You can’t just add a temporary bank to the SWIFT network, and in any event any new bank that is added to the network or starts engaging in the sorts of transactions they have never engaged in before is going to attract a lot of scrutiny in this period

This was a predictable outcome. Cutting off SWIFT access forced Russia to CIPS. Where does this lead? Strengthening CIPS with this move surely weakens the dollar's reserve status globally.

drumhead 5y ago

Which system would you trust? SWIFT or something controlled by China? I have a feeling the China based system would be used far more often politically than SWIFT ever would, especially against those that China deemed to be problematic to them.

hunglee2 5y ago
it won't be a matter of trusting one over the other; smart thing banks will do is register accounts with as many payments systems as are available, in order to mitigate unforeseen future risk.
- Aperocky 5y ago
  Right, people here seem to think it's putting money into SWIFT or some alternative system. SWIFT doesn't hold or keep money, it just process them.
  - hunglee2 5y ago
    that's right, its a bank to bank messaging service. Significant mainly because its a monopoly but totally replicable, just no one has really had much reason to. Though US sanctioning targeted states has made more countries aware of the vulnerability. This episode will see a mushrooming of alts as each significant economy builds at least a failsafe - failure to do is would be gross dereliction of duty at this point
nemothekid 5y ago
>especially against those that China deemed to be problematic to them. I don’t see how this is any different than what the US has already done. The US has now cut off Iran and Russia from SWIFT in political moves. Any nation state is likely already doing the calculus.
- learc83 5y ago
  The difference is China would likely cut off banks and countries who “hurt the feelings of the Chinese people”, i.e., refer to Taiwan as a country, or refuse to recognize the 9-dash line, or comment on their human rights abuses.

tiahura 5y ago

Mostly it just accelerates Russia’s slide into becoming North Mongolia.

DrBazza 5y ago

The dollar is free floating, and the renminmbi/yuan is pegged. I wouldn't worry about the dollar losing its status any time soon. https://en.wikipedia.org/wiki/Renminbi#Managed_float https://en.wikipedia.org/wiki/Renminbi#Managed_float https://en.wikipedia.org/wiki/Renminbi_currency_value#International_consequences https://en.wikipedia.org/wiki/Renminbi_currency_value#Intern... https://en.wikipedia.org/wiki/European_Exchange_Rate_Mechanism#Pound_sterling's_forced_withdrawal_from_the_ERM https://en.wikipedia.org/wiki/European_Exchange_Rate_Mechani...

allisdust 5y ago
The peg is only to keep it from strengthening (unlike some countries that try to keep their currency from sinking). Depending on which country is trying to use yuan as a reserve currency (export based economies vs import based ones), they might actually find this feature useful to stay competitive.
- mensetmanusman 5y ago
  The peg is a subsidy for the world. I.e. those working under that currency regime should be making more money and have higher purchasing power. If the population was educated enough to know they were being stolen from, ‘Office Space’-style, they would throw their leaders out. This is one reason the great firewall of China is so important, and I expect Russia to embrace that umbrella soon.
  - berdario 5y ago
    > If the population was educated enough to know they were being stolen from... This is basically the same argument used by cryptobros and libertarians to criticize inflation. I think there are pretty obvious tradeoffs with letting your currency amass purchasing power: probably it would shrink the amount of exports (which means that a lot of people might find themselves without a job) and it would make it harder to get a mortgage. How do you propose that these negative effects would be mitigated?
  - allisdust 5y ago

adventured 5y ago

> Strengthening CIPS with this move surely weakens the dollar's reserve status globally. No it doesn't. That's a fantasy held primarily by people that dislike the US, the present world order, and want it all rearranged to their bias. You can instantly spot a person's bias by how quickly they whip out the premise that the USD global reserve is going to be damaged by xyz (it seems to practically be a fetish for some people). Typically there's no actual argument presented, just a statement that of course xyz will happen now, finally. You'll see that throughout the Russia war threads (here or elsewhere). Throughout my lifetime I've seen it repeatedly claimed: well of course, now the USD global reserve standard will begin to decline (the Euro was supposed to severely damage it; whoops). The vast majority of the world isn't going to have a strong interest in holding Yuan and that'll define the global reserve status. There are no other major competitors to the USD other than potentially the Yuan, and it's not a serious competitor because of the nature of the CCP. As it is, the Yuan has a smaller presence globally than the Yen and that says a lot given the size of China's economy (ie there's no trust in China and they haven't made much progress in that respect over the past decade).

eleitl 5y ago
Dedollarization in global settlements is empirically a historic trend though. At least until 2020.
csomar 5y ago
> says a lot given the size of China's economy (ie there's no trust in China and they haven't made much progress in that respect over the past decade). Yeah. I really wonder about this: The Chinese are doing everything possible to undermine their Yuan as a reserve currency. You can't freely move money. You can't open a Yuan denominated bank account easily. Their cards are hard to get/use (although some places are opening up). They didn't make a Stripe/Processing equivalent and open it to the rest of the world. You can't incorporate a Chinese company online and opening a Chinese company is a ridiculous process. English is still not widely used. And has anybody checked the ICBC online-banking solution? These guys are still living in the 90s? Most people think China is advanced in payments because they have wepay. But they seem to have just that and everything else (under State control) is still in the Soviet Era.

mvc 5y ago

I think the dollar has never looked better actually. Who from "the West" is going to consider major investments in China now? If by some miracle you manage to keep your IP secure, you risk losing your entire investment if/when the world gets tired of their support for the facists in Russia. [edit] since I wrote this comment.... https://twitter.com/jakluge/status/1499373653372420099 https://twitter.com/jakluge/status/1499373653372420099

nemothekid 5y ago
>Who from "the West" is going to consider major investments in China now? People have been saying this for more than 10 years. As long as interest rates remain low and China continues to grow, there will be plenty of western money flowing in.
- mvc 5y ago
  > People have been saying this for more than 10 years. double-digit growth is great until it ends in zero.
deleted 5y ago
[deleted]
Aperocky 5y ago
Tesla sold almost as many cars in China as it did in US in 2021. Meanwhile Gigafactory Shanghai produced almost half of all Teslas globally. Who? Those who want to make money.
- mvc 5y ago
  We'll see. I myself was sceptical of anti-china propoganda I'd seen until a few days ago and understood why business might think they can work within that environment. But everyone is showing their hands now. And at the moment, it sure looks like China is supporting a dictator on the march to a major war. Trillion dollar funds are writing off their Russian investments at the moment. How long before China is seen in the same way?
- 5y ago

JumpCrisscross 5y ago

> Where does this lead? Strengthening CIPS with this move surely weakens the dollar's reserve status globally This was an unstated policy goal. Russia as a regional power is provably dangerous. As a Chinese vassal, at least it’s contained. Add to that the significant costs to the American economy dollar hegemony has brought [1], and this is broadly a win-win-win. [1] https://www.wsj.com/amp/articles/how-the-reserve-dollar-harms-america-1416527644 https://www.wsj.com/amp/articles/how-the-reserve-dollar-harm...

thereddaikon 5y ago

The world is quickly moving back to a bipolar arrangement. Having a unipolar world was nice while it lasted but was unlikely to last forever.

xadhominemx 5y ago

Chinese banks still need SWIFT, and if we find any Chinese banks using CIPS to do business with sanctioned Russian entities, they will get cut off too and now both Chinese and Russian banks will be screwed.

hackerfromthefu 5y ago
Wouldn't this just be done with an intermediary? Russian bank -> disposable temporary bank -> permanent chinese bank That way the disposable temporary bank is the one that's blacklisted, while the permanent one never did business with the sanctioned entity (directly).
- xadhominemx 5y ago
  You can’t just add a temporary bank to the SWIFT network, and in any event any new bank that is added to the network or starts engaging in the sorts of transactions they have never engaged in before is going to attract a lot of scrutiny in this period