Unfortunate that average Russians are getting hit, especially since they may not even know what is really going on because of the internal propaganda machine. But it may serve as a wakeup call, which may lead to a more clear-eyed assessment of Dear Leader. Despite the demonstrations by Russians against Putin, I heard that many well-meaning brainwashed Russians apparently believe the demonstrators are conspiracy theorists.
The Demolition of Russia's Economy
- Thread starter gwb-trading
- Start date
Sadly economic sanctions primarily hit the "common people". It will not really impact Putin & the government elites. It will discomfort the Russian billionaire oligarchs but it's not like the oligarchs will not be living in nice homes being served expense meals -- even if their yachts, planes, and offshore accounts are frozen.
It appears that most Russians are believing what they hear in the state TV broadcasts still -- as Putin's government takes steps to shut off contrary information coming from the outside world.
Ruble in freefall as Russian currency 'finds another cliff to fall off' in new record low
THE RUSSIAN currency has sunk to new record lows this morning as the impact of sanctions continues to be felt on the economy.
https://www.express.co.uk/finance/c...ssia-Ukraine-war-Vladimir-Putin-currency-news
THE RUSSIAN currency has sunk to new record lows this morning as the impact of sanctions continues to be felt on the economy.
https://www.express.co.uk/finance/c...ssia-Ukraine-war-Vladimir-Putin-currency-news
“Russia is considered more likely to default on its debts than Iraq, Ecuador or Ethiopia after Moody’s slashed the country’s credit rating to the second-lowest rung,” the London Telegraph reports.
Times of London: “President Putin has issued a decree that holders of Russian debt must receive interest payments in roubles, an unpalatable prospect that will do little to stem the flow of western companies leaving the country.”
Times of London: “President Putin has issued a decree that holders of Russian debt must receive interest payments in roubles, an unpalatable prospect that will do little to stem the flow of western companies leaving the country.”
It can. There's always a rub, though.
Breaking The System
MARCH 7, 2022 / JOSEPH WANG / 3 COMMENTS
The banking system is built on trust that the money one places in the care of others will be there when needed. This is as true for the retail investor with deposits at the local commercial bank, as it is for the sovereign with FX deposits at a foreign central bank. Hard earned trust is part of the magic that enables developed market sovereigns to massively deficit spend with limited consequence. The world happily holds their liabilities, be it in the form of deposits or sovereign debt. But that trust is weakened when sovereigns are seizing the assets of their own citizens and other sovereigns without due process of law. The liabilities of the banking sector and sovereign then cease to be risk free assets. Foreign sovereigns must now diversify as a matter of national security, and some citizens must now diversify as a matter of self preservation. This regime change can force a wild scramble into stores of value outside of the banking system including gold, real estate and even crypto.
Financial WMDs
Western sovereigns appear to increasing view the banking system as an efficient weapon for enemies both abroad and within. Targeted financial sanctions have the advantage of quickly subduing without the death and destruction of conventional weapons. The Russian economy was brought to its knees overnight through sanctions that effectively confiscated the deposits the Central Bank of Russia (“CBR”) held at major central banks. There is even ongoing discussion of confiscating the CBR’s assets held at the IMF. Without access to its foreign reserves, the CBR was unable to defend the ruble from significant outflows and watched helplessly as it collapsed by 50%.
Ruble depreciated 25% against the dollar overnight then continued to bleed
Canada also recently deployed similar measures against its own citizens. Canadian Prime Minister Trudeau invoked emergency powers to seize the bank accounts of truckers protesting pandemic related restrictions. Reports also suggested that donors who made legal donations to the protestors were prosecuted based on a retroactive application of the order. Protestors lost assets without any warning, due process of law, or potential recourse. Although this happened in Canada, many outside Canada took note and interpreted it in light of the rapid expansion of government power they see in their own countries. They realize that money in a bank can go poof at anytime regardless of deposit insurance.
Just in Case
Sovereigns across the world are now all alerted to sizable tail risk that they must manage. Foreign reserve managers are a risk averse group who are far, far more interested in safety than profit. They will happily accept -5% real yields, but even a remote prospect of losing all their assets is completely unacceptable. They now understand that the US and EU view banking sanctions as an effective tool that can even be deployed against prominent members of the global community. Risk free assets are no longer risk free.
Just as the unveiling of nuclear weapons in WWII set off a global arms race, so this revelation will start a scramble for alternatives. Any sovereign who aspires to conduct its affairs without kowtowing to foreign powers must be able to survive the confiscation of its foreign reserves. A quick glance shows enormous vulnerabilities for China and India, who both interestingly voted “abstain” on the UN resolution condemning Russian actions. Fiat currencies will continue to be essential for global trade, but there is no point in keeping so much if they may disappear when most needed. A much larger gold allocation is a necessary safeguard against the existential risks posed by financial sanctions.
China and India hold only a sliver of their fx reserves in gold.
Some members of the public will also hedge their assets in fear of government seizure. At least in the U.S., a sizable percentage of the population already perceive that they will lose their job or be “cancelled” for holding dissenting opinions. Trudeau’s actions confirmed their worst suspicions – “debanking” as a tool to suppress dissent. The public’s potential alternatives are broader than reserve managers and include gold, but also assets like real estate, crypto, and paper currency. Dollar currency in particular has long been a favorite of those evading government.
Dollar currency outstanding has been surging with $100 bills the most common denomination outstanding
Safety is Priceless
Safe asset status plays a key role in underpinning the the ability of advanced economies to run loose monetary and fiscal policy with limited consequence. In 2020, advanced economies spent 12% of their GDP on pandemic related fiscal stimulus while the emerging market economies only spent 6%. Poorer countries understand that they could not follow the US and spend 25% of their GDP without imploding their currency. Global investors happily hold newly printed dollars, but would quickly get rid of less established currencies.
Exorbitant privilege in action
This privilege can fade even without affecting the relative dominance of the dollar and euro. Investors could simply follow a well trodden playbook of shifting out of currencies and into tangible assets. This is common behavior in any country with weak institutions and increasingly relevant as advanced economies tarnish their halos. For the typical country, forever deficits and zero interest rates imply high and persistent inflation.
War has a big bad rub too...killing innocent people and soldiers who just want to defend their land.
There is no painless solution.
If crushing the ruble causes financial crisis in Russia, let Putin and his wealthy friends who are sitting on billions step in and help. Far better than having a 6 week land war in someone else's country and then soldiers leave and a shit show is left behind. There will be collateral damage but time to hit putin and his cronies where it hurts...their wallets.
The China-backed Asian Infrastructure Investment Bank (AIIB) announced Monday it was putting all its activities relating to Russia and Belarus “on hold and under review” amid “war in Ukraine.”
“As the war in Ukraine unfolds, the AIIB extends its thoughts and sympathy to everyone affected,” read a statement by the Beijing-based bank. “Our hearts go out to all who are suffering.”
The statement marks a rare acknowledgement by a Chinese government-linked institution that ‘war’ is indeed taking place in Ukraine, as opposed to Russia’s preferred term ‘special military operation.' Russia is a founding member of the regional investment bank in which China holds by far the most voting power — it is considered by some as a rival to the World Bank.
“As the war in Ukraine unfolds, the AIIB extends its thoughts and sympathy to everyone affected,” read a statement by the Beijing-based bank. “Our hearts go out to all who are suffering.”
The statement marks a rare acknowledgement by a Chinese government-linked institution that ‘war’ is indeed taking place in Ukraine, as opposed to Russia’s preferred term ‘special military operation.' Russia is a founding member of the regional investment bank in which China holds by far the most voting power — it is considered by some as a rival to the World Bank.
Well there's really nothing left to "account".
Accounting firms KPMG and PwC to exit Russia
https://www.yahoo.com/now/accounting-firms-kpmg-pwc-exit-223034357.html
Accounting firms KPMG and PwC to exit Russia
https://www.yahoo.com/now/accounting-firms-kpmg-pwc-exit-223034357.html
Guess they won't be able to Netflix and Chill...
Netflix suspends service in Russia amid Ukraine invasion
https://www.foxnews.com/entertainment/netflix-suspends-russia-service-ukraine-invasion
Netflix suspends service in Russia amid Ukraine invasion
https://www.foxnews.com/entertainment/netflix-suspends-russia-service-ukraine-invasion
An argument could be made that netflix gives the Ruskies access to western values/culture for better or worse that is a threat to the Kremlin.
You know there are those that argue that it was not all the Nato/American military power and threat that brought the Berlin Wall down. It was the east germans being able to listern to west german radio across the wall and all those I Love Lucy and Gilligan's Island reruns that gave them the wild and crazy idea that some people out there were actually laughing and having a good time at least a couple times of week. Ginger and Mary Ann probably destroyed more commie minds in east berlin than all the weapons.
Netflix needs to be on the right side of history and russia is toxic. Just sayin that ruskies have always (and certainly Ukraine is the current Exhibit A) pretended that nato power is their threat but it is equally or moreso western culture.
Last edited:
You're talking about a long game. Hot wars tend to be here and now.