Thomas Knapp: The West’s SWIFT Kick is Aimed at Russia, But Also Hits U.S. Dollar

As part of the western  response to Vladimir Putin’s invasion of Ukraine, several regimes acted on February 26 to exclude certain Russian banks from the Society for Worldwide Interbank Financial Telecommunication (SWIFT)  network. As of March 1, Reuters reports, SWIFT says it’s awaiting a list of the sanctioned banks so that it can cut them off.

SWIFT is a messaging service that connects banks worldwide. It’s not a bank itself. It’s not even, strictly speaking, a payment network. It carries instructions for transfers, but the transfers take place via other networks. It’s just one moving part in the world’s complex finance and trade system.

As with most such measures, giving Russian banks the boot from SWIFT  is certain to hurt the sanctioners along with the sanctioned. In this case, the potential victims with the most to lose are  the issuers and holders of US dollars.

Dollars aren’t the only currency that gets moved using SWIFT, but the dollar is the de facto “global reserve currency” and thus the most affected by such moves. Nearly everyone accepts the dollar. Nearly everyone wants to have a fat stack of dollars on hand. In particular, global trade in oil has been powered by the “petrodollar” for nearly 50 years.

If you want to buy a barrel of Brent crude from most sellers, you need to be able to plunk down (as I write this) 105.46 US dollars. Not 395.72 Saudi riyals. Not 7,983.35 Indian rupees. Not 665.78 Chinese yuan. $105.46 or no sale.

What happens when one of the world’s largest oil producers is 1) cut off from SWIFT; 2) doesn’t want US dollars as much as it used to because other sanctions make those dollars  difficult to spend; and 3) has trading partners who are watching these sanctions and fear they could be the next victims? Well, this:

A “rupee-rouble trade arrangement may get a push now that Russia is out of SWIFT,” reports The Times of India.  China will presumably likewise increase its yuan-ruble trade with Russia.

The Times of India article reveals that this isn’t a sudden development: “India had entered into a rupee-rouble trade arrangement with Russia earlier to shield the two nations from unilateral sanctions from the United States.”

What makes the dollar valuable? The same thing that makes anything valuable: People wanting it. Between China and India, more than a quarter of the world’s population are in the process of wanting the dollar less than they used to. That, in turn, makes every dollar in your pocket worth less than it once was.

In the short term, the SWIFT kick and other sanctions may hurt Russia more than they hurt you. But the uncontested reign of the US dollar among global currencies seems to be nearing its end, in part because the US government is driving the world away from it with the constant threat of sanctions.

The smart move for Americans? Hold as few dollars as you can get by on. Trade your dollars for gold, silver, and cryptocurrency while they’re still worth something, to someone, somewhere.


Thomas L. Knapp (Twitter: @thomaslknapp) is director and senior news analyst at the William Lloyd Garrison Center for Libertarian Advocacy Journalism (thegarrisoncenter.org). He lives and works in north central Florida.

14 thoughts on “Thomas Knapp: The West’s SWIFT Kick is Aimed at Russia, But Also Hits U.S. Dollar

  1. SocraticGadfly

    Yeah, maybe, but what would replace the dollar?

    China has repeatedly taken hard passes on the renmimbi being a supplemental global reserve. After the post-Great Recession problems, the euro doesn’t interest a lot of people.

  2. Gene Berkman

    People have predicted the end of the US dollar as the world currency for years. It has not happened,
    despite continuing “qualitative easing” with printing press money.

    I understand why people anywhere would accept gold or silver. But when I count my receipts at the end of the sale day, and it is just paper, I wonder why people everywhere in the world want them and will take them in payment.

    I think Socratic Gadfly is correct – what would replace the dollar? Gresham’s law means people will keep gold or silver, and spend paper money – so metal currency is not likely to replace paper dollars for commers, no matter how much people rely on them for saving.

    The ruble is out. I have several 10 Ruble notes that were worthless before Russia’s violent aggression against Ukraine. Now they are even worth less. Good thing I did not buy them; they were promos at the book trade show – my 10 Ruble notes were free, which is only slightly more than they were worth at the time.

  3. George Phillies

    Gold and silver are acceptable to eccentrics, and for some international exchanges, but elsewise not very useful, not to mention that there is very little of it available.

    In order for a currency to be usable internationally, large amounts of it must be in the hands of many nations. China’s idiotic mercantilist trading policy means that no on else holds appreciable amounts of renminbei, so they cannot buy things with it, because they do not have it. In order to have an international reserve currency you must run large trade deficits for a long time.

  4. Ron Paul Caesar

    How many Libertarians does it take to put in a light bulb?

    Four.

    Two to argue about the philosophical implications of the proper way to climb a ladder and install a light bulb.

    One to take the initiative and put the light bulb up himself without any help, falling off the ladder, cutting his hand on the glass and breaking the light bulb in the process.

    And one to call an ambulance with two non-libertarian paramedics, one of which provides medical assistance to the previous person while the other puts in a new light bulb to see the full extent of the injuries.

  5. Jared

    There’s a Bitcoin bubble because people are treating it as a speculative investment rather than as a medium of exchange, that is, as a currency. They’re still thinking in terms of USD. The cryptocurrency and precious metals markets will most likely see a sharp decline as soon as investors regain confidence in the dollar. Most financial advisors would have metals make up less than 10% of your investment portfolio.

    There's a reason Austrian economists aren't wealthy. Finance is not their wheelhouse. They might believe gold has magical monetary properties and QE means hyperinflation is always just around the corner, but the historical data are not on their side, and libertarians would do well to adopt a more eclectic approach to economic theory in general and monetary theory in particular.

  6. Gene Berkman

    It is important to note that the purpose of this post is not to warn IPR readers that the government takes action that causes the value of their money to decline. That is well known, even though Tom Knapp has previously devoted little attention to this matter.

    The purposse of this post by Tom Knapp is to criticize the response to Russia’s aggressive invasion of Ukraine. Mr Knapp works for antiwar.com, which has betrayed its historic mission of opposing aggressive war, to devote its efforts to proving that Mr Putin is, in the word of Scott Horton, “rational” in carrying out his violent intervention against Ukraine, a country which has never attacked Russia.

    Antiwar.com has redefined the “non-aggression principle. In the reckoning of Mr Horton and others, when other countries discuss their fears of Russia, that is aggression; when Russia attacks their neighbor, that is defense. If you are confused now, it seems so is Mr Horton,

    There is nothing at antiwar.com of interest to any libertarian or rational person. I say that after spending 8 years – 2002 – 2010 – doing unpaid volunteer work as a researcher for antiwar.com. During that time, and before, I promoted antiwar.com to Libertarians. It was a more innocent time, in which antiwar.com really did oppose war. But a rational person cannot live in the past,.

  7. Gene Berkman

    The proper antiwar position is to denounce aggression, and to support the resistance against aggression. The US and EU are responding with economic sanctions against Russian state agencies and oligarchs aligned with the Russian regime, and private voluntary boycotts by numerous private and corporate entities.

    The libertarian non-aggression principle also says that those who are attacked by an aggressor have the right to defend themselves, and to seek aid for that defense. Just as the Democratic Republic of Vietnam had the right to ask for surface to air missiles when US warplanes were bombing Vietnam’s cities and countryside, the Ukrainian resistance has a right to ask for anti- aircraft weapons to stop Russian planes which are bombing civilian targets.

    If you want to make an antiwar argument against those putting up a defense, go ahead and try. But denouncing even non-violent response to violent aggression, as Mr Knapp is attempting to do, indicates that one has an axe to grind quite separate from being antiwar. You can say opposing aggression is not antiwar, but it is clear that supporting aggression is not antiwar.

  8. Gene Berkman

    Just FYI Russian military forces are shelling civilian targets in Lviv, Ukraine.

    Until the end of the Austro-Hungarian Empire, Lviv was called Lemberg, in Galicia,
    a province of Austria with a mixed population of Poles, Ukrainians, Germans, and Jews..
    In 1881 Ludwig von Mises was born in Lemberg, now Lviv.

    Ludwig von Mises was the most important scholar and writer in the Austrian School of free
    market economics – and it is symbolic that Russian forces would launch a terror attack on the birthplace of Mises.

  9. Gene Berkman

    How do you know what I care about? I certainly opposed the Vietnam War, the first Iraq war, the bombing of Yugoslavia, and the second Iraq War. I also opposed the Soviet intervention in Czechoslovakia in 1968 – I was in Young Americans for Freedom – and the Soviet invasion of Afghanistan.

    Yemen and Ethiopia have not come up because nobody is apologizing for Ethiopia’s attacks on Eritrea, or the Saudi attacks on the Houthis. So the nonsense people are writing about Ukraine is what makes it important to write about. And the crimes of the aggressive Russian military are so blatant that only a fool would claim to be a libertarian and still defend or apologized for Russian foreign policy.

    In any case, I sell books on Saudi Arabia and on Ethiopia 2@ the Renaissance Book Shop in Riverside, CA along with books on Russia, China, Germany, Vietnam and many other countries.

  10. Just Some Random Guy

    @ Gene Berkman

    The purposse of this post by Tom Knapp is to criticize the response to Russia’s aggressive invasion of Ukraine. Mr Knapp works for antiwar.com, which has betrayed its historic mission of opposing aggressive war, to devote its efforts to proving that Mr Putin is, in the word of Scott Horton, “rational” in carrying out his violent intervention against Ukraine, a country which has never attacked Russia.

    Antiwar.com has redefined the “non-aggression principle. In the reckoning of Mr Horton and others, when other countries discuss their fears of Russia, that is aggression; when Russia attacks their neighbor, that is defense. If you are confused now, it seems so is Mr Horton,

    There is nothing at antiwar.com of interest to any libertarian or rational person. I say that after spending 8 years – 2002 – 2010 – doing unpaid volunteer work as a researcher for antiwar.com. During that time, and before, I promoted antiwar.com to Libertarians. It was a more innocent time, in which antiwar.com really did oppose war. But a rational person cannot live in the past,.

    Interesting to know this. I randomly stumbled upon that site a week or two ago (before I ever saw this post or your comment) and it did seem to me like it was avoiding making any explicit condemnation of Russia’s attack. Granted, I only read a few, but your assertions do seem to mesh with my experience.

  11. Freeman

    The article’s just saying that blocking Russia from SWIFT will hurt the States more than it will Russia.

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