#SWIFT

A few years back, I gave a speech at SWIFT’s annual meeting knowing little of what it did beyond the speakers I was invited to join.  While the meeting was in a cavernous conference center, the off-hours discussions in magnificent chateaus were small, serious, and — at least for me — insightful as to the awesome power of a seemingly-simple “messaging system”.  Now, of course, the world knows why Swift matters– indeed, Vladimir Putin is taking this so seriously that we’re all reminded of the literal meaning of the “nuclear option.” Putin is right –America’s “soft” economic power gives it a weapon of formidable might.

Will it backfire?  One of the questions I’ve repeatedly gotten over the weekend is whether U.S. banks can withstand market disruptions now or under even greater stress if sanctions expand to still more Russian banks and thereafter also to those still doing business with them.  In short, there is no doubt that banks in the U.S. will withstand near-term stress and even less-resilient ones in the EU and Japan will do the same.

The reason for this is the demonstrable certainty that central banks will intervene to ensure dollar liquidity across the world and financial-market liquidity wherever it seems threatened.  Unlike 2008 and 2020 when Fed windows were opened too wide and too long, this geopolitical crisis is of no financial firm or central bank’s making. What all this new money might do to already-bloated financial markets is yet to be known, but central banks …