Russia Hikes Interest Rates as Sanctions Slam Economy

a reply to: VirusGuard

True however free floating the rouble and hoping it goes up requires investor confidence in Russia. Currently I dont see that confidence as being high. I know Putin has made speeched about the rouble decline being linked to speculative investors but I dont see much in the way of supporting that claim.

The free float was not supposed to be pushed until 2015 but last week the rouble lost something like 7% of its value.

Russia had to dig into its currency reserves in order to continue to prop the rouble up.

To add insult to injury barrels of gas dropped down to the 85 +/- range. Even Kuwait announced a cut back in production. The fact gold prices are dropping does not help either.

a reply to: Xcathdra

Russia had to dig into its currency reserves in order to continue to prop the rouble up.

Yes terrible but you being educated on markets would also know that this happens all the time across the world with markets so yes Russia is just as guilty as the USA, UK and Europe so the point you was making is ?

You do know what a credit default swap (CDS) is don't you, its one of them things that allows people to gamble on assets that they don't own well I hate to break it to you but the USA has something like $1000tr tied up in CDS and yes that is a 'T' whereas Russia has very little exposure to these weapons of financial destruction or even debt so who do you think is sitting on a financial time bomb.

Anyway Russia is a member of the BRICKS and its mate (China) now has a GDP that exceeds that of the USA so I am sure they won't go hungry anytime soon.

Look I even see light on the Horizon, well OK a sign that trying to hurt Russia with oil prices is failing.

Even Kuwait announced a cut back in production

This about turn has nothing, I said nothing to do with Russia signing yet another record breaking gas deal with China yesterday.

Fantastic news on Silver dropping like I've been saying and if it hits my target of $12 oz then you will see that I am not unpatriotic towards America and I will be buying American goods in the form of them lovely silver eagles you sell.

a reply to: VirusGuard

the USA has something like $1000tr tied up in CDS

Source, please.

originally posted by: VirusGuard
Yes terrible but you being educated on markets would also know that this happens all the time across the world with markets so yes Russia is just as guilty as the USA, UK and Europe so the point you was making is ?

You are correct and you are also wrong. In this case the amount of money the Kremlin spent to prop the ruble is not a normal situation. It is eating into their reserves, dropping it down to 455 billion. A week or so ago Russia spent almost 2 billion dollars in 2 days on its currency.

originally posted by: VirusGuard
You do know what a credit default swap (CDS) is don't you, its one of them things that allows people to gamble on assets that they don't own well I hate to break it to you but the USA has something like $1000tr tied up in CDS and yes that is a 'T' whereas Russia has very little exposure to these weapons of financial destruction or even debt so who do you think is sitting on a financial time bomb.

I would argue there is a clear difference in each situation so both are sitting on it. The question becomes if it gets bad enough how does each nation react.

originally posted by: VirusGuard
Anyway Russia is a member of the BRICKS and its mate (China) now has a GDP that exceeds that of the USA so I am sure they won't go hungry anytime soon.

How much money does Russia have access to through BRICS?
The Chinese economy is taking some severe hits as well in its manufacturing sector, which is China's largest money maker. China also got caught lying about its debt when it left out local and regional government debt.


The articel is from January 2014 -
China's 24 Trillion dollar debt bubble
here is a part of the article -

China’s $24 Trillion Debt Bubble. By now, many investors know that since 2008, credit in China has exploded by $15.4 trillion, from $9 trillion to an astounding figure of $24 trillion — as much as the U.S. and Japanese banking systems combined. (In comparison, total U.S. bank assets grew by just $2.2 trillion during this same time period!) China’s monetary authorities are now attempting to rein in the world’s biggest credit bubble, which remains extremely vulnerable to higher borrowing costs.

While the US has fiscal issues so does Russia and China. Something you guys ignore for some odd reason.


Putin is trying to forge an oil deal 2 with China which thus far is not going Russia's way.

I know you guys like to invoke BRICS but realty is BRICS is not going to become viable until 2030-2050. If it were a real alternative at this point then there would be no reason for BRIC members to continue their membership in the IMF and other international monetary entities.

Here is some info to consider -
ATS - What is BRICS and what is its purpose?


Here is the start of free floating ruble -
The Rouble Is On A Tear After The Russian Central Bank Announces Major Policy Shift

a reply to: DJW001

"Eighty-four percent of those polled said they approved of Putin's actions, showing a small drop from the 87 percent who expressed support at the beginning of this month. The number of respondents who expressed disapproval of Putin's actions grew from 13 percent earlier this month to 15 percent."

www.themoscowtimes.com...

Sounds like they'll be fine for a while. He may be vain but people like him. That's more than can be said about the American congress or president. If we haven't rebelled yet I doubt Russia will.

The support for the ruble and free floating it lasted 1 day.

Russian Ruble Plummets and Forces Policy Change - Capital Controls Next?

Talking Points:

• Russia Has Scrapped its Managed FX Regime, Allowing Ruble to Float Freely
• Policy Change Aimed at Scaring Away RUB Sellers with Threat of Intervention
• Capital Controls Loom Ahead, Warning of Aggressive Volatility on the Horizon


The Central Bank of Russia (CBR) abandoned the exchange-rate “corridor” containing the Ruble’s value against the Euro and the US Dollar, allowing the unit to float freely. The move marks the latest in policymakers’ attempts to deal with a precipitous drop in the currency that has thus far produced losses of as much as 47.8 percent this year against the greenback.


Why are there risks of more stringent capital controls and potentially significant trading losses on the horizon?


Markets Send Russian Ruble Sharply Lower on Political Turmoil


The Ruble started what would evolve into a near-parabolic plunge in mid-July following the downing of Malaysia Airlines flight MH17 over the Ukraine. The incident marked an escalation of tensions between Moscow and Western powers that began as the toppling of Ukraine’s government amid mass protests early in the year led to the secession of Crimea and its subsequent Russian annexation. The US and the EU unveiled a new round of anti-Russian sanctions by the end of the month.


Geopolitical Risks Spark Capital Flight out of Russia

Major Risk to Investors as Continued Ruble Losses Invite More Drastic Action


The punchline is clear: further Ruble declines and broader financial market volatility would force the Bank of Russia into even more drastic measures and threaten real monetary harm to investors. What was arguably unthinkable three months ago is now a distinct possibility: the CBR could halt all speculation and cross-currency investments with the Ruble and force substantial losses on investors and savers.


Sophisticated investors are likely among the first to abandon a given market on the first sign of danger. But the risk is clear – what if this sparks a broader run on the Russian banking system?

A pretty good article that goes in depth into Russian finance issues.

a reply to: Xcathdra

Here's a great article on why sanctions won't work. The conclusion is below.

"This means that our current approach of dealing with Russia by sanctions and isolation will not only fail to accomplish its immediate goal of stopping Putin in Ukraine, but it will also be counterproductive to the more important, long-term objective of Russia’s evolution as a normal, modern, globally integrated country. With the approach we now have, not only do we lose the battle. We make it harder to win the war."

www.brookings.edu...

a reply to: tavi45

An interesting read... The issue comes from the fact the article is from June. As we see today some of the speculation in the article has actually occurred, specifically oil prices.

Secondly the analysis is based on Russia's history. That means the Russian people in the analysis were used to the old communist style economic failures. They have had over 20 years now to adjust to the new style economy. To count on Russians to remain quiet during times of severe economic upheaval that was caused by the Russian government can be a fatal flaw.

The Russia trump card, and the article discusses it, is its resources. In this case Russia's oil sector income is the bread and butter of the Russian economy in terms of modernizing Russia. Putin has wagered that Europe needs Russia and will not do anything to upset that balance.

What Putin over looked is the crash in crude, driving down prices and creating an excess of oil on the market. I would bet Europe will take advantage of that to start the shift away from Russia.

The Soviet Union failed economically and running back to that setup is a failure for Russia. The question for russia now becomes how important are the US and European markets to the strengthening of the Russian economy.

is it possible sanctions wont work in terms of stopping Putin's actions in Ukraine? - Sure.
Can Russia replace lost markets in the US and the EU? Possibly but not before the russian economy gets slammed.

Just to be clear, and I think the article over looks this, is the sanctions are not aimed at Russia. They are aimed at Putin and his inner circle. While its possible Putin wont back down with regards to Ukraine, change can still occur if Russians start linking the souring Russian economy to Putin's actions.

The Russian people removing him from office in the next Presidential election, resulting in a change of foreign policy, can be just as effective.

I think this is one of the main reason Putin has gone on his media control spree. The latest law Russia passed has effectively forced CNN out of russia.

a reply to: Xcathdra

True but it's unlikely Putin will be removed. He's incredibly popular. All my Russian friends love the guy. Only time will tell how this actually plays out. Europe is doing pretty badly though as is the US. Basically the US/NATO is playing chicken with Russia and historically Russians are more resistant to shock than the West.

originally posted by: tavi45
a reply to: Xcathdra

True but it's unlikely Putin will be removed. He's incredibly popular. All my Russian friends love the guy. Only time will tell how this actually plays out. Europe is doing pretty badly though as is the US. Basically the US/NATO is playing chicken with Russia and historically Russians are more resistant to shock than the West.

The removal is predicated on the economy and how long Putin will be able to blame everyone else for his mistakes before the Russian people grow tired of it.

He is dealing with people who have had 20 years to adjust to a different economy and political system. Those people had kids who are only familiar with the new system.

To assume Russians will just accept because history has shown Russians under the old system did is dangerously naïve.

originally posted by: mypan
Rubles are doing fine considering they are cheaper to be bought back with their holding of foreign reserves especially the overly inflated US dollars.

This is dedollarisation in motion.

Ultimately Russia is breaking away from USD.

Ruble has lost over half of it's value. What now?

a reply to: OccamsRazor04

Well, Putin is blaming the Russian central bank.

originally posted by: Xcathdra
a reply to: OccamsRazor04

Well, Putin is blaming the Russian central bank.

Of course he is, Putin can do no wrong. End result is the same.

a reply to: Xcathdra

Looks like Russia is still not in a place where it can take territory by force and mess with a never fallen superpower like it was the Soviet golden age.

All that young money made in the last decade produced a country of yuppies that were more arrogant than the most backward American of the American golden age. I guess they will start to sell their second and third summer homes and investment properties world wide. I will see if I can buy back some of Spain from a Russian who came there balling.

Well, Russia. Good luck.

Next time, dont think of yourself as being as smart as you think the world is dumb. Also, learn your lessons. Stop repeating recent history at least.

a reply to: tadaman

With the status of the Russian economy Russia barely has money for itself, let alone the promises made to crimea. Do we think the south and east Ukraine will be a priority for Russia?

Part of me thinks we are seeing a scorched earth policy 2.0 in south and east Ukraine by Russia. If they can't have it Russia will make it as painful as possible for Ukraine to keep it.

I think Putin is in a world of trouble. His actions are coming back to bite him in the ass. He is starting to blame Russian institutions for his stupidity. He still can't tell Russians how he will fix the economy. The Russian military is not happy with Putin choices.

I think Putin days are numbered.

a reply to: Xeven

Let's guess that you are from the US.

After everything that your country has done and still doing not only to other countries, but to its own citizens, you still bash on Putin and Russia in general for FAR FAR FAR FAR FAR FAR less things? I've always tried to see the logic behind a typical US citizen, but after all this years, I still can't see it. Your own police keeps killing innocent people, your government is spying on you, you've got no idea on what your taxes are being spend to...But don't mind that, i mean the Russians man, right?
'Murica the greatest country ever.

I mean, you are on ATS for God's sake, and just...forget it, it doesn't matter, I do not know why do i even try. Do not bother replying to this post

Sorry for a little off-topic Xcardtha

a reply to: Nikola014

It happens so no worries.

With that being said if you don't understand America / Americans then how can u arrive at the conclusions you did? Its possible to not agree with the us government, challenging and questioning what they are doing while still having issues with Putin and his actions.

We can openly challenge and criticize our government without fear of trumped up charges and arrest, which is what we see occurring in Russia with those who don't care for Putin or his actions.

Maybe the billionaires should kick in. I'd say it's about time.

Maybe the billionaires should kick in. I'd say it's about time.