Sam's Exchange: A SWIFT move to a New World Bank

© Photo : Source: Sam BardenSam Barden
Sam Barden - Sputnik International
Unless you work at a bank, you have probably never heard of the SWIFT system. SWIFT, which stands for Society for Worldwide Interbank Financial Telecommunication, is a worldwide financial messaging network that exchanges messages between banks and other financial institutions.

Unless you work at a bank, you have probably never heard of the SWIFT system. SWIFT, which stands for Society for Worldwide Interbank Financial Telecommunication, is a worldwide financial messaging network that exchanges messages between banks and other financial institutions. The  

member-owned, Belgium-based network is a major part of the plumbing in today’s crumbling world financial system. It is the messaging network that facilitates global trade. In an unprecedented step, and under immense pressure from the European Council and the U.S. government, SWIFT has grudgingly un-plugged Iran from the system, supposedly to increase pressure on Iran over its nuclear activity. In reality, the move is an escalation in the real war, the economic one, which is raging behind the scenes and is likely to not only see the emergence of new financial messaging system, but also a new World Bank.

The political manipulation of SWIFT, which is a private business network, will give birth to alternate financial messaging systems much sooner than we expect.  As other countries become wary of the biased actions of a select club within the U.S., UK and EU, SWIFT may well find itself being replaced. After all, it has only been around since 1973, and was founded on the support of just 239 banks in 15 countries. Given that many do not agree with either the Iran sanctions - China, Russia, India, the members of the Economic Cooperation Organization and countries in South East Asia, Africa, and South America - it is clear that support is already there for a parallel or replacement system to SWIFT.  A new global era increasingly without the dollar has already started. Bilateral currency deals and regional trading arrangements are becoming more and more common, to avoid the dollar or the euro or the British pound, and skirt economic sanctions. The sanctions on Iran do not just hurt Iran. They restrict economic growth for Iran’s many trading partners. That is the source of the clear impetus for change. For most countries it is an economic decision, not a political one, that is creating the drive for a new, multilateral financial messaging system that is not subject to bullying by politicians.

The current financial system broke beyond repair in 2008, and remains on life support. It cannot last. What we have discovered since 2008 is that the free market, and free market capitalism, is anything but free. It is a manipulated system designed to benefit the few at the cost of the many. This is not a political rant, it is a fact. The 2008 bank bailouts, and the current European crisis, showed that taxpayers and ordinary banks outrank citizens when it comes to bailouts. Has anyone heard of the trillion dollar distressed mortgage bailout fund (DMBOF) designed to keep people in the homes? No? That’s because there isn’t one. Most people have heard of TARP (Troubled Asset Relief Programme) though.  The banks received trillions of dollars and euros in an effort to keep the free market system going. Yet it is not working. The agreements and the financial design agreed in 1944 at Bretton Woods no longer have currency in the 21st century economy.

The Word Bank is another product of Bretton Woods, and one that is under immense pressure behind the scenes. Traditionally, an American citizen has filled the post of World Bank president, and this is unlikely to change. The World Bank is an international financial institution dominated by American and European elites, and has been accused of implementing economic policies which favor the elite instead of performing its intended function: providing capital for developing counties. The World Bank has been criticized for a structural adjustment policy of offering loans to poor countries in exchange for capping inflation and addressing fiscal imbalances. These are known as austerity measures - exactly what is being applied in Greece and Ireland, via the World Bank’s sister organization, the IMF.

There is real potential for the emergence of a new “white knight” World Bank, one with a commercial focus, not a political one. There have long been rumors that China is considering sponsoring such an institution, by providing it with real money, rather than debt money. Those who would join are the same countries that are against unplugging Iran from SWIFT. Not because they feel bad for Iran, but because they do not want their own economic growth to be unilaterally stifled by a system controlled by the U.S. and Europe for its own political and economic benefit.

Excluding Iran from SWIFT will only accelerate the emergence of a new financial messaging network, and of a new alternative to the World Bank.

The views expressed in this article are the author's and do not necessarily represent those of RIA Novosti.

Current markets are anything but global or integrated.  What if we had a paradigm shift in the way we think and transact when doing business with each other?  Balanced global trade can only occur if we have transparent, accessible and efficient markets.  We are on the cusp of achieving this, although most people cannot see it.  Sam’s Exchange aims to give its readers a clearer view and a platform for discussion.  Markets, trade and economics are in fact nothing more than the result of our thoughts and actions expressed in numbers, not the reverse.

Sam Barden is founding Partner of SBI Markets DMCC, a Dubai-registered commodities trading and advisory company.  Barden has worked in the global financial markets for more than 17 years in Europe, Russia and the Middle East.  He has advised and executed strategic transactions for both the government and private sector, in particular in energy and commodity markets, advising various energy producing nations on their strategic market developments and interaction.  He holds a degree in economics and finance from Victoria University, Melbourne, Australia.

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