US Threatens To Cut Off China From SWIFT If It Violates North Korea Sanctions

Tyler Durden's picture

In an unexpectedly strong diplomatic escalation, one day after China agreed to vote alongside the US (and Russia) during Monday's United National Security Council vote in passing the watered down North Korea sanctions, the US warned that if China were to violate or fail to comply with the newly imposed sanctions against Kim's regime, it could cut off Beijing’s access to both the US financial system as well as the "international dollar system."

Speaking at CNBC's Delivering Alpha conference on Tuesday, Steven Mnuchin said that China had agreed to "historic" North Korean sanctions during Monday's United Nations vote. "We worked very closely with the U.N.  I'm very pleased with the resolution that was just passed.  This is some of the strongest items.  We now have more tools in our toolbox, and we will continue to use them and put additional sanctions on North Korea until they stop this behavior."

In response, Andrew Ross Sorkin countered that "we haven't been able to move the needle on China, which seems to be the real mover on this, in terms of being able to apply the real pressure. What do you think the issue is?  What is the problem?"

The stunner was revealed in Mnuchin's answer: "I think we have absolutely moved the needle on China.  I think what they agreed to yesterday was historic.  I'd also say I put sanctions on a major Chinese bank.  That's the first time that's ever been done.  And if China doesn't follow these sanctions, we will put additional sanctions on them and prevent them from accessing the U.S. and international dollar system.  And that's quite meaningful."

And to underscore his point, the Treasury Secretary also said that "in North Korea, economic warfare works. I made it clear that the President was strongly considering and we sent a message that anybody that wanted to trade with North Korea, we would consider them not trading with us.  We can put on economic sanctions to stop people trading."

In other words, to force compliance with the North Korean sanctions, Mnuchin threatened Beijing with not only trade war, but also a lock out from the dollar system, i.e. SWIFT, something the US did back in 2014 and 2015 when it blocked off several Russian banks as relations between the US and Russia imploded.

Of course, whether the US would be willing to go so far as to use the nuclear option, and pull the dollar plug on its biggest trade partner, in the process immediately unleashing an economic depression domestically and globally is a different matter.  So far Washington has been reluctant to impose economic sanctions on China over concerns of possible retaliatory measures from Beijing and the potentially catastrophic consequences for the global economy. Washington runs a $350 billion annual trade deficit with Beijing, while the PBOC also holds over $1 trillion in US debt.

Ironically, the biggest hurdle to the implementation of the just passed sanctions may be the president himself.  “We think it’s just another very small step, not a big deal,” Trump told reporters at the start of a meeting with Malaysian Prime Minister Najib Razak. "I don’t know if it has any impact, but certainly it was nice to get a 15-to-nothing vote, but those sanctions are nothing compared to what ultimately will have to happen,” said Trump who has vowed not to allow North Korea to develop a nuclear ballistic missile capable of hitting the United States.

Separately, at a hearing of the House Foreign Affairs Committee on Tuesday, Republican Chairman Ed Royce said the U.S. should target major Chinese banks, including Agricultural Bank of China Ltd. and China Merchants Bank Co., for aiding Kim’s regime. Russia also came in for criticism. Assistant Treasury Secretary Marshall Billingslea said in prepared remarks to the committee that North Korean bank representatives “operate in Russia in flagrant disregard of the very resolutions adopted by Russia at the UN.”

While China and Russia supported the latest UN sanctions, officials made clear they were troubled by Haley’s comments in the Security Council that the U.S. would act alone if Kim’s regime didn’t stop testing missiles and bombs. They emphasized the world body’s resolution also emphasized the importance of resolving the crisis through negotiations. “The Chinese side will never allow conflict or war on the peninsula,” Foreign Ministry spokesman Geng Shuang said in a statement on Tuesday.

In a soundbite late on Tuesday, Japan's Nikkei quoted prime minister Shinzo Abe who said that "in the end, [the North Korean] problems should be solved through diplomatic dialogue," adding that Japan will "work together with the international community to apply maximum pressure, so that North Korea commits to perfect, verifiable and irreversible denuclearization." For Japan to engage with the regime, he stressed it would have to be "on the condition that North Korea commits to" this complete denuclearization."

Which, of course, won't happen: “sanctions of any kind are useless and ineffective,” Russian President Vladimir Putin told reporters earlier this month at a summit in Xiamen, China. “They’ll eat grass, but they won’t abandon their [nuclear] program unless they feel secure.

Predictably, North Korea's Foreign Ministry slammed the sanctions saying it “condemns in the strongest terms and categorically rejects” the United Nations adding more sanctions, North Korea’s state-run KCNA reported on Wednesday morning. Instead, North Korea warned it “will redouble efforts to increase its strength” as it seeks to establish “practical equilibrium” with U.S.

And so, not only is the entire geopolitical circle jerk back at square one, but the ball is again back in North Korea's court, while the decision on whether or not to launch another ICBM really depends on whether China will give it the quiet go ahead; a China which responds notoriously poorly to being threatened in the global financial arena, like for example when the US threatens to kick it out of the global dollar system...

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Shemp 4 Victory's picture

Oh, please do that! It will be more entertaining than the last election.

Forward, to decay!

bamawatson's picture

seems sort of like me telling a hot chick that if she does not shape up i will not bang her

remain calm's picture

ABOUT TIME. Those fucking bastards have raped US of jobs, intelectual property and economic growth. Grab them by their puusies Donald. They are nothing but paper tigers trying to project economic stength, its is total BS....their whole economy is built on credit. It will be easy to topple. Fuck em Donald you know you want to do it. JUST DO IT!

tmosley's picture

<----China adopts blockchain settlement systems

<----China develops its own settlement system

remain calm's picture

Command and control economies have never worked in all of history and neither will China's. CHINA WILL FAIL. QUIT BEING PUSSIES

strannick's picture

Chinas takeaway..develop an alternative to SWIFT

@remain calm.

Are you implying we have free markets?

giorgioorwell's picture

China is laughing their asses off at us with every passing day....

philipat's picture

China and Russia have already developed alternatives to SWIFT. Next steps; link them together and bring in other countries; price commodity furures contracts in RUB/CNY (backed by Gold as necessary). This is all already underway and the days of the US being able to threaten other Nations in this way will soon be over as the USD becomes less important globally.

American Psycho's picture

Remind me, isn't China loaning us money so we can live overextended lives? 

auricle's picture

I've never heard what a billion laughing Chinese people sounds like. They are rolling over laughing at that empty threat. 

Pinto Currency's picture

Mnuchin can't be this stupid (raising the question if he is trying to crash the dollar).

China has their yuan oil contract ready to go and the Shanghai gold exchange international board already in operaton.

Yuan oil contracts with settlement either in Yuan or converted from Yuan to gold in Shanghai will mean the end of the dollar.

Again, Mnuchin can't be this stupid.

US needs to get ready for a return ot gold money ASAP with its own gold money system - the globalists are trying to kill it by forcing China's hand.

Manthong's picture

 

 

Well, they are likely F’d anyway….

If you understand how the deal was put together in the late ‘80s...  they own all the tech and resources we shipped over there………

But now there are robots and they cannot possibly generate the 30,000,000 jobs a year they need to.

 

..except for maybe the rice paddy's and squid fishing.

 

HowdyDoody's picture

"US Threatens To Cut Off China From SWIFT [for any reason they can think of]"

Bring it on, Munchkin. Bring it on.

 

Manthong's picture

 

This is probably the smartest audience on the interweb, but…….  

Most cannot define the 300,000,000 legal US citizens and 30,000,000 illegals/criminals in the US.....

..and they cannot even have a clue how to evaluate China.

 

.......but Jamie Demon, Lloyd the Blankenstein and the Rasputin Rubin does.

 

..unlike most here... I have been there and know the issues.

 

new game's picture

sooner(it happens) the better. we have the resources to rebuild, moderize independent of china.

they need us way the fuk moar than we need them. the intellectual resource were copied, stollen, extorted, but not lost. 

soon as this transpires china's credit mountain will crumble.

bring it....

ps.rare earth stuff an issue...

and many other oligarch related issues, ie apple, gm, on and on.

so in the end maybe just puff, fluff and nothing rice bowl...

Manthong's picture

..but there at least one or two narrow minded pea-brained cretins who probably have the same brain tumors Teddy K and his soul-mate McShitstain has pollutring the digits here.

The Ram's picture

Mnuchin is that stupid.  This is the dude that stood outside of Fort Know (supposedly) and told us, 'Yep, the gold is all there.'  

auricle's picture

How are they going to buy US treasuries without SWIFT? Oh wait, they aren't. Odly, they wouldn't be able to sell them either. Perhaps that is what the real threat behind SWIFT is. 

stecha's picture

At this point China has learned to write off U.S. treasuries and stay atop thier economics. U.S. threats have been ineffectually dead for sometime now.

Okienomics's picture

China will trade the US Treasuries to the IMF in exchange for SDRs.  Mosely may be right about global currency going blockchain, but probably not in the way he thinks it will.  The IMF will run the global currency show via a blockchain SDR traded only between nations, multi-national banks and some multi-national corporations who do most of the work for the government sector, while trade within nations (commerce) will be conducted using local currencies.

China does not want the the dollar to collapse, nor does it want the Yuan to be "the" global reserve currency (and the Triffin paradox that comes with it).  U.S. Treasuries move to stronger hands who will hold them to expiration.  The dollar will fairly switfly return to being a local currency; it won't collapse but it will rebalance.  This will be good for the inherent strength of the U.S. Economy.

The SWIFT system will be gone.  Global balances of power and trade will be mostly restored.  Novo seclorum ordo. 

MEFOBILLS's picture

Treasuries are a debt instruments denominated in dollars.  They will have an exchange rate with SDR's, and hence said exchange rate will influence the national currency.  There will be no "local" currencies, as money's true nature is law.  Local currencies will not gain traction, as they are not good for taxes or good for payment of legal debts.

IMF and World Bank will not stand alone with their own SDR good only for "trade," as that would take purposeful law.  A Bancor system is a purposeful legal system that would match all international goods trade with an eqivalent bancor unit.  SDR's are baskets of currencies with some /commodities in basket.  SDR's are held as reserves in private banks, hence it is functional unit of 'private banking" fractional reserve system.  

SDR's do allow some delinking of the dollar, as dollars are presently held as reserves, even in Chinese and Russian private banks.  

There is no magick mechanism with blockchain as some ostensible free market money finds some sort of solution. That is wishful thinking that ignores realities. China pushing for SDR's is a way of her distancing from dollar, while she simultaneously moves to price oil and international goods in Yuans.  

Federal Reserve Dollars are private bank money, the U.S. is not sovereign, which is why Triffins Paradox is real.  The finance parasite is dug in deep, and will kill its  U.S. host before letting go.  Munchkin is now threatening China with Swift.  

chubbar's picture

Exactly! This is like telling your dad that he'd better loan you $20 or you won't ask to borrow his car any longer. The US gov't can't be this stupid or unaware, they must be doing this on purpose.

Dancing Disraeli's picture

'Backed by gold.'

Just take your payments in gold, and that little plan will go tits up in no time.

The reason NO country backs their currency with gold is that it forces them to not inflate said currency.

The whole point of issuing currency is to steal through inflation, and no sovereign power is going to voluntarily forego this power.

philipat's picture

The subtelty of this move by China appears to have been lost on you? They will NOT back the CNY with Gold. With futures contracts traded in CNY in Shanghai (International exchange) AS ALREADY IS THE CASE, CNY can be used to purchase physical Gold on what are Chinese PHYSICAL Gold exchanges. This allows any Nation who doesn't want to trade commodities in USD (There are many) and who doesn't have a need for CNY to both bypass the Dollar and acquire physical Gold in settlement.

Americans consistently underestimate the Chinese. This approach not only allows circumvention of the USD for all who wish, does not directly BACK the CNY with Gold and is a much less confrontational approach of achieving the same Goals than pissing in Washington's face? Check mate.

Dancing Disraeli's picture

'Acquire physical gold at settlement.'

Yes.

 

BennyBoy's picture

 

Munchkin brain needs to sit down and shut up.

Think for yourself's picture

We all need to stop confusing stupid with evil. No one in .gov with their armies of think tanks and strategists is stupid enough for such an obvious "cut off your nose to spite your face" move. This can be nothing but a willful orientation to collapse the historical phase of US hegemony from within in order to introduce the long-awaited NWO, this time legitimized by a veneer of multipolar politics if not - worst fucking case scenario -  intersectional identity politics baked into the political correctness of global institutions.

mkkby's picture

What a fucking JOKE. The euro was born late 60s to fight US power EXACTLY THE SAME WAY. Look how much it's slowed down US dominance. Exactly none.

Idiots here at the hedge with no knowledge of history think a miserable little futures market is going to crash the dollar next year. The chinks are flailing around like impotent children because they have no power to change their servitude to corporate america.

The truth is china is scared. A billion hungry peasants who have a history of killing their leaders. If Mnuchin carries out that threat their economy crashes over night. (Look what happened when India tried to outlaw some cash.) Or if Bannon/Trump get their wish of a border tax/tariff. China goes down hard.

The dollar will not last forever. Less than 50 years away is wishful thinking, not logic.

Archie1954's picture

On the contrary, US so called dominance has been slowed down considerably and its degenerate empire is disintegrating before our eyes. That is what happens when Washington uses its financial straightjacket to bind other nations. Soon they become sick of it and look elsewhere for their financial and economic transactions.

Archie1954's picture

On the contrary, US so called dominance has been slowed down considerably and its degenerate empire is disintegrating before our eyes. That is what happens when Washington uses its financial straightjacket to bind other nations. Soon they become sick of it and look elsewhere for their financial and economic transactions.

new game's picture

where can i settle in gold? waiting for that answer....

cornflakesdisease's picture

The payments being backed with gold are meaningless.  Do you think that China or Russia would ever allow any redemtion?  No.  So it means nothing.

philipat's picture

Just wait and see, shall we? Where you have PHYSICAL commodity exchanges in local currency (Like in Shanghai and Homg Kong) there is no way to STOP anyone from converting the CNY earned from an oil trade for example to be converted into Gold. It isn't a paper scam "market" like Comex.

new game's picture

when moar oil is pumped(sold) than gold is delivered than what? and that is a realistic question by doing a simple physical gold inventory. Or gold starts to go up dramatically!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

qomolangma's picture

WHY NOT? As long as the physical bullion will still move from west to east they will face no problem to let buyers in the east redeeming the bars at the comparative price plus some biz margin. Imagine it as simple as this... some merchants just go to the west stores to buy the physical bullions in usd --> physics being sent to east ==> the merchants will sell the physics in the east stores in the local currencies (cny in CHN or rbl in case of RUS). Just move the supply eastward to cater the demand of those customers with no usd but ample of other kinds incl. oil. Just bypassing the usd. Get it now? :-)

At any time there's a flow disruption to get the physical bar in the west stores, price adjustment on the bar will be done on those east side to reflect the "scarcity".

Mr 9x19's picture

"" cut access to swift "


so now, usa is threatening to do what others exactly are searching for ?

 

i think usa is definitily loosing it, by 2020 the usd as reserve currency should be done.

truthseeker47's picture

When the little brat won't mind, the only recourse is to put pressure on the "parents".

OverTheHedge's picture

Is this being done intentionally, not to punish China, but to protect US politicians from being blamed from the collapsing dollar? "We had to cut trade with China, for the children, and we will all just have to live with the difficult consequences, which no one could have foreseen."

Perfectly valid  reason for a collapsing dollar, and keeping the reality hidden from the idiots who believe the news. If it's not on CNN, did it actually happen?

post turtle saver's picture

there isn't enough phys in the world to back the level of trading activity you're talking about... that's been the whole point all along...

goddamn but you people utterly suck at history, logic and math... how about a little research into how we ended up where we are today before posting stupid bullshit like that?

Not My Real Name's picture

"there isn't enough phys in the world to back the level of trading activity you're talking about..."

1. In a free market, the price always adjusts to avoid shortages

2. Gold only changes hands during trade imbalances. So you don't need an equivalent amount of gold to accommodate ALL of the world's trading -- just the deltas between imports and exports between individual nations. And how do those deltas will remain managable? See item 1.

remain calm's picture

Clearly, more free than China's. China Is at least a decade or two away from having markets deep enough to compete with ours, They are a facade. 

post turtle saver's picture

the only reason anyone can attempt to say China has a "deep market" is because they export to the largest consumer market on the planet - USA

China has forgotten the key principal in how judo works... "if you have a hold on me, I have a hold on you"

The Wizard's picture

China has been developing an alternative to SWIFT called CIPS. The US is pissed they are working with Russia to sidestep the petrodollar.

CHINA MAKES THE BIG MOVE OF THE CENTURY

Here are some moves by China that would piss off The Munchkin, et al.:

"CHINA IS CONSIDERING DEADLINE TO GO ALL ELECTRIC - A DEATH SENTENCE FOR THE INTERNAL COMBUSTION ENGINE"

electrek.co/2017/09/10/china-deadline-all-electric-end-internal-combustion-engines/

This move will impact every major oil producing nation in the world, and no matter what currency is used to buy or sell oil with, this move will offset the largest cash flow aggregate model on Earth.
The net loss of collective revenues will be dramatic as the centuries old fossil fuel monster is being taken down, along with the horrific Federal Reserve Bank's Petro/Dollar scam.
Here in America, the lunatics at the Federal Reserve Bank are mumbling over the recent gold inventory inspection by the current U.S. Treasury Secretary at Fort Knox for good reason, they are aware of what the "Karma Clause" may really mean to them after over 100 years of financially sodomizing the American People and virtually destroying all of America's economic might;

"CLASS ACTION LAWSUIT AGAINST THE FEDERAL RESERVE BANK"

fromthetrenchesworldreport.com/class-action-lawsuit-against-the-federal-reserve-bank/24473

Over at the Pentagon, the controlled Generals are "all in" and totally engaged in "defending the dollar" assisting the President since he lobbed 59 missiles at Syria, launched a Naval armada in the Pacific toward North Korea and threatened Venezuela, somehow still thinking in lost Petro/Dollar equations that motivate their actions, they could somehow effectively counter China's deft economic moves.

"TRUMP'S EVIDENCE OF SYRIAN CHEMICAL ATTACK FOUND BURIED AT SEA WITH OSAMA BIN LADEN"

www.rumormillnews.com/cgi-bin/forum.cgi?noframes;read=73263

But now - it gets worse...much worse;

"CHINA-RUSSIA PREPARE "FINAL DEATH BLOW" FOR AMERICA AS MASSIVE ARMIES FACE OFF IN EUROPE"

www.whatdoesitmean.com/index2383.htm

This is just the tip of the spear being hurled at a malevolent beast that has created such a disaster for the entire planet and all who live on it.

When you read the untold story below, the actual backstory behind the energy technology revolution being staged by a world so ready to move forward, you will come to know what a paradigm shift really is. (updated version)

"EVUR - ELECTRIC VEHICLE UNLIMITED RANGE"

www.evur.us

cornflakesdisease's picture

How do you plug in ships, jet liners, earth moving equipment, etc.  Oh yeah.  You don't. 

swmnguy's picture

If you plug in everything else, you have to buy a whoppin' lot less oil.  That's the part the energy industry always glosses over.  In their struggles to keep a stranglehold on the world economy, the carbon industry always says that since we can't immediately and  completely replace oil-related energy, then it's foolish pie-in-the-sky to do anything at all.

That works in the US with the corporate-owned media ready to swallow whatever corporate PR they are told to recite verbatim.  But it doesn't work in countries where policy comes first.

post turtle saver's picture

please explain how generating electricity with coal (really shitty coal at that) moves you away from dependency on "the carbon industry"...

webmatex's picture

Thanks Wiz,

Links that i wouldn't have seen.

Hemp Capacitors - really cooool, and the guy in this vid said the SuperCaps can be charged once a day for 2700 years and the cost is currently $500 per ton - too good to be true?

charges in seconds...

FUEL TANK OF TOMORROW - SUPER CAPACITORS;

https://www.youtube.com/watch?v=3K8JIC-ov_Y

Sounds like theres some real breath taking tech coming - always wanted my car to be a portable generator.

Cannabis plants are a beautiful genetic gift to the planet, it can solve many of the defects of our current consumer plastic nightmare.

The Wizard's picture

The US under Clinton and the Bushes gave more innovative technology away to the Chinese, it should make our head spin. The trade-off was for China to continue to purchase US Treasuries and we'll give you the technological kitchen sink. The Chinese used their tyrannical govt. and slave labor to support the petrodollar.

The patient and methodical Chinese knew the day would come when the Western fiat system would choke on itself. The West used political hacks to suppress technological innovation, primarily in the area of energy. If the university R&D departments would have put 10% of their resources into perfecting Tesla technology this country would be way ahead of the curve. Many independent researchers were whacked or never provided the opportunity to move their technology forward. The Deep State used their financial instruments to keep a populace fat and happy. The day of reckoning is quickly approaching.

Here is a good example: https://www.youtube.com/watch?v=BOWLWe9HEMw&feature=youtu.be

Do people realize all of the major pharmaceutical companies had close to 2,000 cannabis based medications prior to 1937? What happened? That is another story.

The over 800 US military bases spread around the world are there to protect a dying petrodollar with stooge tyrants. When the tyrants turn on the US they are severely dealt with.  Close the bases, bring the troops home to a safer place, put them at the borders and we don't need a wall.

caconhma's picture

The USA is doomed since we are ruled by total idiots. The same is true about Putin's Russia.