The result of the Russian Central Bank’s hike in interest rates turned out to be worse then my worst nightmares: it reversed the downward spiral of the Ruble for only about half an hour, then the Russian currency resumed its collapse. Rumor has it that the Central Bank might begin buying Rubles next, which I personally don’t see as useful at this point.
I have asked for expert opinions and I hope to get them soon. In the meantime, here is my own take on this which, caveat emptor, is backed by ZERO personal expertise in these matters. Still, for whatever it’s worth, my own speculations:
1) The Ruble is falling due to three completely separate reasons:
i) The recession in the West which triggers a drop in oil prices
ii) The AngloZionist pressures on OPEC not to cut production
iii) The impact of western sanctions
2) None of the above are enough to explain what is happening. The real problem is the lack of credibility of the Russian Central Bank and the Kremlin. Thus the key factor in the fall of the Ruble is distrust of the Russian authorities.
3) This distrust is fully deserved. The head of the Central Bank is a notorious 5th columnist which Putin failed to fire, arrest or otherwise remove from that position. But there is worse:
4) Putin personally is not trusted either, at least not on economic matters. Dmitri Orlov put it very well:
Some people are starting to loudly criticize Putin for his inaction; but what can he do? Ideologically, he is a statist, and has done a good job of shoring up Russian sovereignty, clawing back control of natural resources from foreign interests and curtailing foreign manipulation of Russian politics. But he is also an economic liberal who believes in market mechanisms and the free flow of capital. He can’t go after the bankers on the basis of ideology alone, because what ideological differences are there? And so, once again, he is being patient, letting the bankers burn the old “wooden” ruble all the way to the ground, and their own career prospects in the process. And then he will step in and solve the ensuing political problem, as a political problem rather than as a financial one.
Orlov, as always, is spot on here. Let me explain, as this is crucial:
First, yes, Putin is an economic liberal. I hate to admit it, but I am convinced of it. So while he is “socialist” in a sense of supporting a social state, which helps the poor, needy, sick or old, he also is a “market capitalist” in the sense that he believes that market forces should be left free to maximize the competitivity of an economy. This might be a result of seeing a (pseudo-) socialist system fail or because he sincerely admires the competitivity of US and other (pseudo-) capitalist economies, I don’t know. But there is no doubt in my mind that he is an economic liberal.
Second, it would be typical Putin to let the “Atlantic Integrationist” 5th column to fail so badly as to make their removal a political demand of the Russian people. The problem with that is that this strategic can take a huge toll on the Russian people and economy.
Right now the situation is so bad that the value of some high visibility Russian stocks has begun to plunge. As does the Ruble. As does the price of Brent.
I am not much of an economist, much less so a trader. But I have to agree with the markets here: the current Putin+Nabiulina combo is not one deserving trust and if I had to speculate, I would speculate against Russia right now.
Maybe I am naive or primitive but I see only one way to reverse this death spiral: not only to fire Nabiulina, but to fully nationalize the Central Bank, fire the totality of its current top management and to appoint a new team with Sergei Glaziev as it’s director with a rank of Minister of Finance. Then Russia must take the strategic decision drop the current system of backing each printed Ruble with purchased US Dollar and instead back the Ruble with either energy or metals or a combo of real-word resources. My own vote would go for gold.
The Saker
Look, it’s fairly simple: link the ruble to gold and silver standard. All currencies used to be defined as ratio/weight in gold (the dollar up to 15th August 1971, the franc up to the beginning of this century for example… and they have historically been the best performing currentcies, by far and wide *just look up for example the strength franc had against dollar up to the point it was knocked out of gold link: it has lost very significant value). Oh, and all those who have erected Western style fiat ponzi scheme institutions in Russia are all cabal’s moles, all of them! Bring the ruble out of fiat ponzi scheme and the Rothschild’s scum rules regarding it, and it shall prosper.
All fiat currencies are going down soon enough. In the long run none of it shall survive, it’s just the question of how well is someone skilled in tricks and illusions regarding that system, and I’d say Russin are clearly not very skilled at it: I’d say that Russins are even less talented for fiat ponzi machinations than they are for propaganda, so they should not try to play that game at all (and all, or most, financial, bankster vermin in Russia are in fact cabal’s workers, they work for the globalist City of London empire — so that something one has to have in mind as well)
And also lets not forget the most important, a thousand yrs old history lesson regarding fiat ponzi scheme: everywhere the fiat system has been tried, it failed spectacularly, and every fiat currency not linked with gold has failed without exception, always. Bring in the honest money, link the ruble with gold and silver, and quit with that ponzi play.
Mr Saker, check this out: http://financialsurvivalnetwork.com/2014/12/john-butler-will-putin-back-the-ruble-with-gold/
I dont think it will happen, but it sure is an intereesting idea!
In his book Geithner reveals Obama et al flirted with idea of nationalization of Citigroup at one time.
Putin doesn’t live in America. He doesn’t need to flirt, he should act.
What is the potential for Russia to buy up Rubles from Western banks at fire sale prices and then price contracts in scarce roubles? Does this approach mentioned in “Rouble vs. Dollar Games – From a Perspective of a Russian Businessman” work?
http://fortruss.blogspot.com/2014/12/rouble-vs-dollar-games-from-perspective.html
I would concur that Russia is not alone in suffering economic hardship as deflation is hitting most countries of the world.
As an aside, see the Dmitry Medvedev two part Manifesto on Ukraine that clearly states the dire situation Ukraine is facing:
http://fortruss.blogspot.com/2014/12/dmitry-medvedev-manifesto-russia-and.html
http://fortruss.blogspot.com/2014/12/dmitry-medvedev-manifesto-russia-and_15.html
He clearly points out that the costs (>500 billion EURO) and cultural shock of EU integration is not possible. This mirrors the Brookings Institute analysis that Ukraine would require up to one TRILLION US$ to integrate into the Eurozone:
Ukraine: A Prize Neither Russia Nor the West Can Afford to Win
By: Clifford G. Gaddy and Barry W. Ickes
http://www.brookings.edu/research/articles/2014/05/21-ukraine-prize-russia-west-ukraine-gaddy-ickes
lavrov”nato is not enemy of Russia “
!
now the traitor has guts to be openly treacherous.
time to put behind bar that rascal lavrov .
2011.
How Medvedev and lavrov singlehandedly resurrected almost defunct nato.
= However, Russia cannot be blameless in the imperialistic destruction of Libya. Medvedev is still part of Russia’s power elite but his role in Libya’s destruction means he can do great harm to his own country. He almost everyday he calls for the privatization Russia’s resources! So what is the difference between the privatization of Libya and Medvedev’s daily call for total privatization of Russia’s key resources? Libya will come back to haunt Russia’s foreign policy as long as Medvedev is part of the ruling power inside Russia. He and is inner circles of lavrov helped the West destroy Libya.
“Enemy of the State” – part 1
This was never a “Counteratack” but a back-stab. The ONLY goal for most economies is to have a STABLE currency. That is because most have a fairly proportionate trade balance.
Any exporting country surely benefits from a devaluation of their currency and the opposite for countries that mostly rely on imports.
Russia exports stuff that the others cannot make or dig up from the ground. Russia imports stuff that there is no reason Russia shouldn’t be able to make herself. To we need to give examples of petrocarbons, minerals, timber, weapons, nuclear fuel vs. consumer electronics and lower grade business IT-equipment like servers, routers and switches?
The industries that Russia should/could stimulate are empowered by a drop in the Rouble. Cars, planes, clothes, agricultural products (let’s not forget that Russia potentially has the possibility of being one of the biggest food producers in the world Industrial machines – yes they are bought from western companies but there is no reason engineers working for Halliburton or Aker or Siemens to be better than Russian ones.
In the longer run, a lower Russian rouble can only boost the Russian economy. Oh did I mention government budget surplus?
Well yes, in the short run, iPads, cars will be more expensive. Travel / tourism will be more expensive (which could / should btw empower domestic tourism).
BUT – a worker doesnt eat dollars. He / she is notworried about “How many dollars can my rouble-paycheck buy?” Rather than the bills related to heating, food, electricity, fuels basically the price of (diesel and benzin), public transportation and housing rents. As long as these are sourced in roubles domestically it should not hurt anyone. The prices should not rize dramatically (even though there will be inflation / price rize).
“Enemy of the State” – part 2…
About the interest rates: Isnt it curious that the Norwegian Central bank (a country “suffering” from reduced Oil prices and a drop in the Norwegian Krone) just REDUCED the interest rate (From 1,5% to 1,25%)? Think about it!
Pls dont try making any normal market economy fiscal sense of the interest rate increase from 10 to 17%. Dont go the speculators and short sellers and futures and options and CFDs… It is against any school book theory. There is an attack on the Russian economy. The Central Bank of Russia is an Enemy of the State. Raising the interest rate is contrary to ANY relevant financial logic. In some, utopian, free market circumstances one could argue that: “Well, we raise the rate, the bank raise the rate on deposits which will encourage people to put their money in Russian banks, which will make them have to buy the rouble.” In this case it is nonsense. How about Russian bonds? Even the best currency trader in Wall Street or City of London would not be able to convince their customer that buying the Rouble now is a good “investment”.
An interest rate of 17% (meaning a real house morgage would be at least 20%) and short terrm loans even higher would mean that people that have loans in their houses (luckyly not that many in Eastern-Europe as in the West) would lose their homes and companies will go out of business.
It has nothing to do with stabilizing the currency – it is an excuse to ruin the economy.
Even if the prices of consumer goods and travel abroad become too much of a burden – would that really “break the Russian spirit”? How many unemployed / empoverished / suffering from the panic the economy would it take to loose faith in Putin? A LOT!
This is a country where 20 years ago people stood in line for toilet paper. Wanna hear some Soviet jokes? (there are many to illustrate my point: “So long as the bosses pretend to pay us, we will pretend to work,” or “Q: What is 150 yards and eats potatoes? A: A Moscow queue waiting to buy meat.”
This is a country where prostitution was the only profession most girls could have only 10 years ago.
Even more, this is a country that lost 30 million lives (and God only knows how many crippled and traumatized), in living memory”.
There is no other nation that has suffered so much through it’s history. What Russia is experiencing now is no more than a “bear market” where the reason is clear to most Russians, and the latter is the good news.
Russians know that it is not “the invisible hand of the all-mighty Market” that is the reason for the economic hardship that will be coming.
The farce of the central bank and the interest rates should be clear even to grade-school kids. They will clearly know who is guilty.
Why is Putin tolerating this? Why hasn’t he clearly announced on TV that these internal enemies of state will not continue?I belive it is because he knows things need to get worse before they get better. I think he knows that the public need to realize what this 5.column is actually doing.Remember that (famous) clip from around 2003 where Putin “rounds up” the biggest oligarchs includin Khodorkovsky and tells them how it is going to be (pay taxes, stay out of politics etc..)? Well at that point the people were fed-up with the oligarchs. They knew that they were the ones robbing them. There was no from the general Russian population on the oligarchs? Or the “newly rich”.
I believe that this is his strategy, make people realize how Evil the 5th column and the Central Bank etc really are, before making a popular (even if legally dubious) maneuver to remove them.
Lets pray. Seriously!
Ves
@jack
It wouldn’t have made any difference if Russia hadn’t “annexed” Crimea…The West(EU/USA) would have found any other “argument” to blame and attack Russia resurgence/resilience…Strong Russia is seen as a threat by US imperialistic/hegemonic elite.
If I were an investor, I wouldn’t trust Russia unless she cleaned house and stood on the solid ground of her generous resources. But I’m not an investor; in fact, I consider investors to be the scum of the earth, exploiting everywhere and pushing to the brink, doing nothing constructive, using other people’s money (and lives) to stockpile their own. The system is rotten but we’re so addicted to it that we can’t see it as murderous; weak kneed, faint hearted and brain scattered as we are from being part of it. Who doesn’t want to save the system? Only fools and madmen like myself who consider those enslaved by the system to be the true fools and madmen posing as saviors and wisemen. Yes, I know there are exceptions but they only prove the rule, and there are investments that do not divest nor involve usury.
Ukrainian crisis has been gooing on for over 8 months now and the situation is not getting better. It is on the verge of a catastrophy. Many of you seem to be enamored with the way Mr. Putin has handled this U.S. created crisis. Unfortunately, Mr. Putin is only reacting to the environment of his own making.
Had Mr. Putin began economic reforms in the early 2000s the Russian Federation would have a more diversified economy that could better withstand crisis like this.
Moreover, Mr. Putin failed to stamp out corruption that is present in all levels of Russian society including the military.
Mr. Putin became president in 1999 yet any substantive reform of the military began only a few years ago.
Therefore, the military might that is being portrayed to the Russians is a hoax and a bluff to the “West”, nuclear forces notwithstanding. Yes the Russians have some weaponds systems that are technologically advanced. However, their numbers are vastly inadequate for any confrontation with NATO. The overwhelming number of ground based and air military hardware is out date and in need of an upgrade. It would take a week or two for NATO to overwhelm the Russian air defenses and to gain air superiority and then its the end of the road for the Russian ground forces. If this wasn’t the case, I am sure that Mr. Putin would have used his military advantage to overrun all of Ukraine at the same time that Russian forces secured Crimea. By doing so, all of the bloodshed and NATO posturing would have been prevented. Yes the “West” would have levied sanctions on Russia but that is the case today. It is also underlined by NATO comfortably arming the Ukrainian army.
For those of you who think that Novorussia will survive, you are gravely mistaken. The Donbass region is a barganing chip to be used to secure Crimea.
Without Donbass, Ukraine has little to offer the “West”, therefore, it is vital for Ukraine that the Donbass region remains within it’s borders. Europeans are not interested in a military conflict with Russia.
In the next few weeks, it will become clear that the war in Donbass will be scaled down. Lavrov has clearly stated that Donbass should remain as part of Ukraine.
Ultimately, Russia doesn’t have the resources to prop up this region that will need billions to rebuild it’s infrastructure, it’s factories, it’s mines.
As soon as possible Mr. Putin must begin badly needed reforms to the Russia’s economy before any remaining intelectuals leave the country. By rebuilding factories to western standards, fostering entreprenuership, and providing cheap financing Russian can rapidly improve the economy and be able to have stronger voice in international affairs. Until then, Russia will be reacting rather than leading.
From Moscow Times,it looks like Russian people can speak for themselves.
“Parliament member Nikolai Aferyev of the Communist Party called for Central Bank head Nabiullina to be called to parliament to explain her actions.
“These measures, which have been repeated six times in Russia, have not produced any result. … I can’t call the Central Bank’s actions anything other than sabotage,” news agency Prime quoted Aferyev as saying.
Vladimir Zhirinovsky, the vehemently anti-Western head of Russia’s Liberal Democratic Party, on Tuesday accused Nabiullina of taking Russia down the wrong road and called for capital controls and the criminalization of “improper use” of foreign currencies.
Oksana Dmitriyeva, a member of the social democratic A Just Russia party, told radio station Kommersant FM that, for once, she agreed with Zhirinovsky.
“What the Central Bank is doing is not only a mistake, it is not ignorance, it is not even unprofessionalism — all of these actions are closer to schizophrenia, to madness,” said Dmitriyeva, who is also deputy head of the lower house of parliament’s budget and taxes committee.
The deputies were joined in their disapproval by Boris Titov, who Putin appointed last year to the newly established post of business ombudsman.”
Do NOT panic! The cleaning time has come and the action like Khodorkovskij /putting him into a jail / is just behind the door.
You can’t put the people into a jail if you don’t have enough evidence. You must to catch the thief exactly during his action!
Everything is in perfect order and as the astrologers predicted that the Pluto will make a huge cleaning around the earth, it is just happening.
Russia has plenty enough riches and they will survive no matter what. Putin like the liberal economy because he also has experienced what kind of lazy people communist regime can produce, at the same time you will always have a very productive people with the vision, no matter what kind of regime you will have.
I believe Russia needs to coordinate this with China, who are also tired of the currency games played with US controlled “world reserve currency”. I’m pretty sure there have been talks about situations like this in the BRICS meetings. Now is the time to show the BRICS can also act, and work as an alternative to the dollar system.
My two kopeki of person with some economics studies:
– the “the boss is great, he’ll fix all up” attitude does not help
– capital control does not help. There are 1001 ways to bypass it, and it is probably too late. Also, you can operate naked shorts with roubles practically everywhere. Since the time finance lost touch with real economy these moves are unstoppable
– If even you could save the rouble they would start attacking bonds or something else. In 2011 Italy was brought to her knees and forced to a change of government simply by speculating against her sovereign debt
– Nabiulina was supported and promoted by Putin, strange as it may seem. Her 17% rate move does not help, actually increases panic
– “Brother” China could help, even with a gain (while saving Russia, buying roubles now to pay gas later would be a good bargain) but is not doing so. I don’t even mention snakes in the grass like “brother” Turkey
Sum. Exceptional measures are needed. I personally would repeal contracts with the West, becuase of its aggression, and demand payment for gas, metals and the like in gold – not even roubles, you would prop up the game.
It would be some kind of economic earthquake, especially now at Midwinter, but it would show reaction to the action. I am afraid there is not much other left by now.
Instead of crawling away from the Dollar System, stand up and march away from the $ while you can still march.
Maybe the RCB interest rate hike is a financial judo move (i.e. use the impetus of the adversary for your own ends). Maybe:
http://fortruss.blogspot.it/2014/12/rouble-vs-dollar-games-from-perspective.html
As commented above, where exactly will Russians want to invest outside Russia?
BTW, are Chevron and Shell no longer interested in shale in Ukraine?
http://fortruss.blogspot.ca/2014/12/ukraines-two-big-gas-deals-are-now-both.html
Yes, Putin should take over control of the Central Bank, drop the dollar as reference and use gold and energy in stead. And also CUT interest rates to 3% to get the domestic economy going/growing.
Nic
First of all, stop panicking.
Second, as many before me pointed out Putin until recently was not able move freely on domestic front. He will soon move these 5 column bastards away from power and everybody in western pay can or will call it coup BY Putin.
Third i think the BRICS nations and probably the OPEC to do this: https://www.youtube.com/watch?v=qq0ykF2mHgQ
Have a nice day.
Oracle 911
FYI,
ON the 14th of this month their was an editorial in the Hayat(saudi owned and saudi propaganda sheet in the arab world)by Ghassan Charbel explaining that the last visit of saudi FM to Moskow turned sour the russians refusing the saudi proposal to kick out of their jobs 40 syrian dignitaries with at their head Pres.AlAssad,The editorial continued that the oil price will continue to fall till the Russians come to their sense in Syria(accept the proposed Diktat).This is a join american-saudi strategy to destroy Russia from within.
BCH
[from Blue]
I suspect Putin does not understand economics all that well because he was educated by the standard neo-classical economics academia, who understand virtually nothing, beyond strange mechanics similar to those worked out in the middle ages to predict how the planets move while the Earth is the center of the solar system. It wa sa very complicated scheme and sort of worked, even while dead wrong.
The Russian economy can collapse only to the extent that it is tied to external and world economies — internally the production, consumption, and flow of goods still runs.
Is the Rubel collapsing? COmpared to what? The dollar — artificially propped up by any number of fraudulent schemes.
One of the rich guys — Soros? — when the market crashed replied to someone who said he lost so much said he hadn’t lost anything because he wasn’t selling his stocks. If Russia stops selling Rubels it doesn’t matter how low the price outsiders offer.
Remember that much of these mechanizations are done by the people who dealt in second and third order ridiculous derivatives, which lost any real meaning.
Old soviet joke:
The local party head asks the farmer how wheat production is doing. The farmer says: very good — better than last year, and, God willing, next year will be even better.
“Now comrade, says the party leader, we both know there is no God.”
“Yes, comrade”, say the farmer, “and we both know there is wheat”.
But now there IS wheat and many other real goods. It’s time people understood that there are no dollars, or rubles, or any other sort of crazy abstract financial scoring points that have much meaning in terms of the tangible economy.
Just keep the real economy going and when the currency bubbles collapse the nations with sound real economies will be left standing — don’t fall for trap of cutting production and other real things for the sake of silly pieces of paper and electronic financial statements.
–Blue
In the short term there are considerations about keeping foreign investments and foreign businesses, many of which would prefer to continue friendly cooperation – win-win. Ordinary americans and europeans would benefit.
Since switching over to gold would be a blow to the Us elites they probably would force foreign businessmen to unwillingly opt out.
Part 1 of 2
In a nut shell the Russian Ruble is falling against the US Dollar because the oil price is dropping and Russia is a major oil exporter.
Other major oil exporters are getting hammered as well. Nigeria is struggling, stock markets in the middle east are tanking.
The Norwegian Krone is falling as is the Canadian Dollar.
The market is worried about a default on Russian debt. This is mostly Russian company debt rather than government.
The things that I find really interesting about the situation is that the Russian government budget is in surplus, Russia’s exports exceed its imports, Russia is a net creditor (i.e. other countries owe it more than it owes them).
The factors in the previous paragraph should be supporting the Ruble. So the obvious question is why aren’t they?
The answer is that exchange rates are not based on trade flows (i.e. exports vs imports) or amount of reserves (foreign currency, precious metals, etc) but on sentiment.
If people think the ruble will fall then they start to short it (sell it now then buy it when it cheaper after it has fallen). If more people are shorting it than going long (i.e. thinking it will rise so buying it and holding on to it to sell it later when it is higher) then it will fall.
Of course this becomes a self-reinforcing trend and thus leads to over-shooting i.e. currency falls too far to the point where it is undervalued. Eventually it reaches a point where something triggers a reversal (e.g. oil price starts to increase).
At this point with more people thinking the ruble will rise rather than fall the majority want to buy rubles to benefit from its rise. The demand for rubles increases and the price starts to rise. This encourages more people to go long and the those holding short positions get squeezed.
At this point the people going short on the ruble start to freak out and want to close out their positions which involves buy rubles.
Isn’t this a great game?
So if you want the ruble to rise (i.e. appreciate) or at least stop falling then you need to create demand for rubles as this will work to push up the price of rubles.
Exporting more is one way as it either brings in rubles (if the foreign importer pays in rubles) or foreign currency which can be used to buy the rubles on the open market.
Continued in part 2.
Part 2 of 2.
Continued from part 1.
Now one of those curious things about Russia is that it has a large amount of capital flight each year. This is not foreigners withdrawing the money that they put in earlier. If it was it would end i.e. you can only withdraw what you’ve put in and then nothing more.
The other curious thing is that Russian firms are selling in dollars and then not bring the money to Russia and converting it to rubles. Instead they park it their foreign bank accounts which companies have set up to hold their funds.
These previous two curiosities imply a need for changes to laws. Basically it seems that capital controls are required.
E.g. money received for exports made needs to be deposited at the central bank and converted to rubles at the prevailing exchange rate.
E.g. impose a tax on removing capital from Russia. Chile even does this for foreign capital if it is not left in Chile for long enough.
While capital controls that make it harder or more expensive to get money out of a country do tend to discourage people from putting their money in there is another dimension to this.
Of course not all money is as good for an economy. Hot money (speculative in nature – quickly in and then quickly out) typically only servers the “inverter” (actually a speculator) and the banks through which it flows. Somebody setting up a business in Russia and bringing in money to do so is far more beneficial to the Russia economy. Even someone buying an existing business in Russia from Russians is effectively increasing the amount of capital in Russia which can be used to start new business or expand existing ones.
This brings me to my (almost) final point which is that Russian firms would probably stop borrowing in foreign currency if there were local sources of finance. After all then you don’t have to worry about things like the exchange rate making your repayments suddenly much more expensive…
In the medium to longer term Russia needs to build up its financial sector to bridge this funding gap.
Property rights in Russia are an area that are still viewed with trepidation in other countries. After all no one wants to invest and then lose it when the government takes it away. So good courts of law and solid property rights would help.
Of course a plot of land in Russia, a stand of timber or a well run business is still what it was two months ago. And now it is 50% off. If you think things will get better then it is time to buy if you can.
jack said…
“Russia’s economy is collapsing because of his actions in Ukraine that you loudly championed with you ideological garbage.
What did you think would happen when Russia annexed the Crimea and threatens to annex Eastern Ukraine and perhaps the Baltic states?”
First,Russia’s economy is in trouble because they are being attacked.And if they decide to attack back (as they should),then WW3 could destroy us all.The US,Europe,and Russia are certainly goners.
Second,unlike your idiotic claim Russia has NEVER “threatened” to annex Eastern Ukraine or the Baltic States.I dare you to post any time they did.And Crimea was reunited by the will of over 80% of its population to rejoin Russia.
Uncle Bob
Evgeny Fedorov :Central Bankers suppressing Russian economy
https://www.youtube.com/watch?v=VT085isnyB0
I think this explains what happened Saker:
Russia pulled a Volcker and jacked rates up suddenly, so whoever was shorting the ruble was completely destroyed if they didn’t get out of their position about as fast as possible. Count the MINUTES between the rate hike announcement and opening of markets (in the US), and the shutting down of USD/RBL trades so they could cover.
Very, very well connected players.
So, yes, Russia DID short squeeze and the US pulled another MF Global style save of their insider asses at everyone elses expense. But I think this is more a sign of weakness than anything else because despite their “insider-ness” they totally didn’t see this coming so maybe they aren’t really all that clever.
@Kat Kan
I have seen reports that Crimea border move was negotiated by jccc (at about the same time as the latest ceasefire, and apparently by the same people). Rationale for that was given that a while ago, an Ukrainian village Strelkovoe at Crimea border moved border posts so it ended up on Crimean side. Villagers are por-Russian. There is gas pumping station in the village.
http://sevastopol.su/world.php?id=59537
It was agreed to be reversed.
Ukraine claims that Russia agreed to do it by 9 December, but this did not happen in practice
http://news.bigmir.net/ukraine/864360-Rossija-ne-vyvela-vojska-iz-Ada-v-Hersonskoj-oblasti—pogransluzhba
While Russia claims it withdrew as agreed
http://ru.krymr.com/content/article/26733690.html
So I guess they now plan to drive in those tanks to check it out, and bring some Grads for to encourage themselves.
I agree with Coldish, watch out for the currency (and commodity) speculators. They are reason #4 all by themselves. The ruble got attacked after the 2008 Georgia war and that was separate from any “sanctions.” It cost Russia almost one-third of her reserves then.
Oh, and the US State Department has a direct line to currency traders and includes manipulation in its bag of tricks.
I´m sorry Saker, but in economic issues “trust” is a liberal concept. Russia or Brazil will never had full confiance of finances. Brazil external debt is a fraction or US debt, why US risc is lesser?
Monetary policy is a political issue. Putin ought act for discipline the conditions of actors of financial Market.
Alexandre
Link the ruble to gold and silver standard. All currencies used to be defined as ratio/weight in gold (the dollar up to 15th August 1971, the franc up to the beginning of this century for example… and they have historically been the best performing currencies, by far and wide *just look up for example the strength franc had against dollar up to the point it was knocked out of gold link: it has lost very significant value). Oh, and all those who have erected Western style fiat ponzi scheme institutions in Russia are all cabal’s moles, all of them! Bring the ruble out of fiat ponzi scheme and the Rothschild’s scum rules regarding it, and it shall prosper.
All fiat currencies are going down soon enough. In the long run none of it shall survive, it’s just the question of how well is someone skilled in tricks and illusions regarding that system, and I’d say Russin are clearly not very skilled at it: I’d say that Russins are even less talented for fiat ponzi machinations than they are for propaganda, so they should not try to play that game at all (and all, or most, financial, bankster vermin in Russia are in fact cabal’s workers, they work for the globalist City of London empire — so that something one has to have in mind as well)
And also lets not forget the most important, a thousand yrs old history lesson regarding fiat ponzi scheme: everywhere the fiat system has been tried, it failed spectacularly, and every fiat currency not linked with gold has failed without exception, always. Bring in the honest money, link the ruble with gold and silver, and quit with that ponzi play.
The problem for most people here is accepting the Western media rhetoric that the USD/Rouble exchange rate is the measure of the state of the Russian economy.
The fact is that just about anyone can sell Roubles they don’t own and buy $US thus putting downward pressure on the Rouble. This is exactly what is happening.
The intention is to panic those who actually own real roubles to sell them before they are worthless and therefore allow those shorting the rouble to cover their position.
The problem is that these are only paper roubles being traded. Russia as a nation is still there and still the same size the last time I looked.
It also has minimal debts compared to the value of its assets and a positive income. In other words quite creditworthy.
Certainly in comparison to the USA I would suggest very creditworthy.
So Putin doesn’t actually have to do very much. In judo terms his opponent is charging towards him with an incredible amount of ferocity and energy.
All he has to do is step aside at the last second and let them crash into the wall. Maybe give them a bit of a flick on the way through to up the velocity.
China has all the $US that Russia could possibly want. Do you think Putin will go begging to Wall Street?
One thing is quite clear: Russia does not have expertise in monetary management. With some formal training in Economics, I point out the following omissions, actions that should have been taken 6 months ago:
(1) Limit the convertibility of the Ruble;
(2) Restrict the right to purchase foreign currencies only to certified industrial end-users for approved imports;
(3) Prohibit commercial banks in Russia to enter into forward currency contracts except to offset the purchase of hedge contracts allowed to certified importers/exporters;
(4) Do not float the Ruble’s exchange rate. Set administrative exchange rates;
(5) Backup (that is guarantee)the foreign central banks’ holdings of Ruble by a basket of gold, Chinese Yuan, select other currencies – but not the dollar or the Euro;
The problem is that when Russia switched from socialism to what they thought is capitalism, they neither understood the different strands of capitalist economic thought, nor grasped that capitalism at home can be built only in stages, and that in the beginning stages external economic relations and monetary management MUST be controlled and cannot be left to the so called “free market” forces. I think a whole generation of Russians has been badly schooled in Economics and is rendered even more silly by their wild-eyed enamour of the “capitalist paradise”.
Real world management of capitalist economies is very different to its ideology and propaganda that the Russians seem to have swallowed wholesale. Precedents for steps (1) through (5) abound in the world – in the capitalist world at that: Britain during the seventies, India during her mixed economy days as she was building up her economy, China in the same way, France for a long time after the war, etc. And why is it that Putin is shy about kicking out an incompetent head of the central bank? Do you think that any Central Bank head would last more than a few hours in any Western country, especially the US, if they tried to resist the economic policy set by the Government? The “independence” of Central Banks is a legal fiction, a matter of form only. It is the Govt that is supreme. Read Paul Samuelson’s Economics (a capitalist Economics 101) to understand how Central Banks (called the Federal Reserve in the US) operate.
Why on earth can’t Russia hire Economics experts from India and China?
P.S. From Russia Today:
“The Russian Central Bank has seemingly lost control of the ruble, which lost more than 20% in just hours on Tuesday. Currency interventions and interest rates both have failed to save the ruble. The next major step could be limiting the cash flow.”
This is exactly what the banksters want. It means hysteria and a rampant dollar black market. Back to the nineties…
You can’t beat them at their game, you need to change the rules…
I believe Russia needs to coordinate this with China, who are also tired of the currency games played with US controlled “world reserve currency”. I’m pretty sure there have been talks about situations like this in the BRICS meetings. Now is the time to show the BRICS can also act, and work as an alternative to the dollar system.
Hey have a look on the french Jacques Sapir own blog here two of ’em articles http://russeurope.hypotheses.org/3161 // http://russeurope.hypotheses.org/3159 – This guy is french but unbiased toward Russia (which is rare enought for a frenchie) he has really a class analysis.
Russia’s defense industry is the next target of US sanctions, due to be signed by Obama.
Chaos is the number one export of the U.S.
It usually works. Like an arsonist throwing matches.
Just for this which I think is worth reading. Perhaps, in our shock at what the bankers are doing, we haven’t looked far enough ahead.
http://fortruss.blogspot.com.au/2014/12/rouble-vs-dollar-games-from-perspective.html
all right, I’ve heard such theory today – that Putin (or let’s call it collective Putin, those who now run Russia) will impose sanctions on the EU and the US by ordering their companies, most of those are partially state owned, to stop paying to their EU and to a lesser degree US creditors. Russian companies have borrowed about 500 billion in the EU. If Russia does that, it would be the financial nuclear strike with unpredictable consequences, it will throw the EU into turmoil and will likely lead to collapse of the euro. Now under the theory that I heard Russia would not formally default, only nominally private companies would stop repaying. What will it achieve. These companies buy up euros and dollars to repay their debts and they are now deprived of the source of refinancing abroad. If they refuse to pay under sanctions or because of situation of force majeure then a) rouble will stabilize – the main purchasers of currency which were not present a year ago will be gone as they won’t have any incentive to buy currency and b) the EU banking sector (and to a lesser degree US banking sector) will be dealt a 500 billion euro blow. Considering the state the euro is in it might be the final straw and the ultimate counter sanction sanction. This is quite obvious but again who knows.
+1 to “Don’t panic”.
+1 to “don’t turn on the Schlomo-filters”.
I don’t understand anything about the economy, it’s just too boring. But I’m sure that there are plenty of people in Russia and elsewhere who do understand exactly what’s going on and are on Putin’s and Russia’s side. I can say only one thing – backing ruble by gold would be a bad move at this time. Maybe that’s the actual plan? Drop the ruble so far so as to provoke Russia to this step, and in that way buy all the Russian gold? Who knows.
Don’t filter or delete any stupid or provocative posts, even ones calling you names, Saker. This isn’t a democracy, it’s your own damn blog and you can do whatever you want, but I’d prefer to see the stupidity and blindness of these people come out in the open. Makes me feel so much better knowing that I’m not one of them ;)
From ZH:
“The question is will Putin swallow his pride and proceed with the next logical step as the Eurasian axis realizes the time to abandon the dollar has long past, that now only actions matter and not words, and joins forces with China in a new monetary union, one which combines the Ruble and the Yuan, and is backed by China’s gold and Russia’s natural resources, as cheap as they may be for the time being… until one or more of the largest middle-east oil exporters experiences a major and ‘unexpected’ geopolitical incident, one which sends the price of oil soaring right back up.”
http://www.zerohedge.com/news/2014-12-16/western-banks-cut-liquidity-russian-entities
Trading in the Russian Ruble suspended. If anyone knows forex trade, please explain what it means.
The Russian Ruble Is Hereby Halted Until Further Notice
http://www.zerohedge.com/news/2014-12-16/russian-ruble-hereby-halted-until-further-notice
How is this not an act of war?
http://www.zerohedge.com/news/2014-12-16/western-banks-cut-liquidity-russian-entities
I think Putin made an error in announcing the tests of the SWIFT alternative for Dec. 15.
I find it to be highly improbable it was a coincidence that FX cut off ruble trading a day later.
Question for the experts: What would it be to stop selling oil/gas in dollars when Putin could say screw the contracts Europe. If you want Russian energy, you must pay in rubles or gold.
No more of Janet Yellen’s green toilet paper that Russia can churn into gold for dollars.
The other shoe will drop with a Uki re-boot of the war before Christmas.
Lavrov is saying to French media that NATO is not Russia’s enemy and says that NATO has <“quietly” asked Russia to continue working outside of “the context of NATO-Russia projects” on, for instance, training pilots for the Afghan Air Force.>
Yet, how can Russia not see that NATO is getting Russia to serve it’s (NATO’s) own agenda with requests like that?
Also who is financing these requests of Russia by NATO: is Russia financing the Afghan pilot training or is NATO paying Russia for it? If Russia is spending its own money it is nothing but a SUCKER.
NATO is not Russia’s enemy – Lavrov to French media
http://rt.com/news/214919-russia-nato-enemy-lavrov/
Time to punish Ukraine’s perfidy in this economic war by calling in the $3 billion bond.
No more Mr. Nice guy
Current financial and consequently economical events (downfall) in Russia once more – this is just the last “case study” – demonstrate that most if not all economic and money theories and practices should be simply trashed as they cannot resist any serious difficulty (cyclic or – as this is the case – structural crisis due to resource downgrading).
IMHO only a deep reform of the banking system towards nationalization, socialization of the whole economy (corporatism), zeroing the national debt and a high degree of autarchy can do the job.
In other words – among the others the Ezra Pound’s economical recipes which worked so well in Italy in the 1930s’.
Specifically for Russia, about which economy I’ve a personal knowledge, the great fault was to rely *almost* only on the export of fossil fuels; by the way, virtually all attempts to establish “incubators” for small and medium enterprises went wrong mostly because they management were and have been left to oligarchs and simple gangsters who stole most of the invested money such as in the infamous “Skolkovo”. President Putin may well be a sincere patriot but there is a huge underbrush of thieves in comparison with which Italy (my country) is a heaven.
There is no doubt it is deliberate. Wall Street and the City can manipulate currencies like the Ruble and the speculation against it is driven by these 2 evil centers.
Maybe this is a way to monetary reform and the return to a gold standard? A means to terminate the central bank? The Russian debts might just tip the world into one massive chain-reaction bank default. All Moscow need to do is to have state-owned enterprises suspend payments for western issued debt. KA BOOM!!!!
Dear The Saker,
Lots of news:
http://sputniknews.com/business/20141216/1015917304.html
SCO doing payments in national currency to curb speculators.
UBS sees mild forms of capital controls:
http://sputniknews.com/business/20141216/1015915000.html
The engineered fall of the rouble to tie in with the US passing new sanctions bill today which will be like those imposed on Iran and affect any country wanting to do business with Russia.
Hold onto your hats it is going to be a bumpy ride…..
Rgds,
Veritas
Open new local banks based in cities/regions/states that are strictly there to finance locals and local business. Use the north dakota model for inspiration. Create reserves for these banks by issuing ‘golden’ rubles which can be purchased by any russian citizen+resident[for tax purposes] with money currently in RU These rubles will be backed by gold, and the money used to purchase them will be reinvested in gold, they should be available in the usual combinations of denominations, so if you can only afford 50R you can ‘book’ the value of your savings. These banks should also be able to issue ‘credit’ to citizen+resident to allow them to raise the amount of ‘golden’rubles they can purchase, for a limited period.
Whilst the ruble can be allowed to float/sink on the int.forex market, an official price should be established and enforced as the rate for purchases from the CBR, at maybe the price on feb 2 2014. Plus a 10% transaction tax. Limit the amount of ‘golden’ rubles anyone can purchase to both twice the average annual income and above that to only current ‘onshore’ deposits on 16:12:2014 that must be left on deposit in the new local banks for seven years. I imagine it would be a good idea if the new banks were run by former high ranking military men of impecable character Of course you will need to impose a 20% turnover tax on all foriegn ‘enterprises’ and a further tax on dollar transactions. Best wishes Saker and Russia
@Francesco:
I could not agree more. Ezra Pound wrote about the solutions.
As Imran Hosein said, you cannot beat them at their own game. You have to re-write the rules.
It’s time fo make bold moves.
Hi Saker ! Wow alot of comments on this thread ! But Saker, there was a good comment,
Rouble vs. Dollar Games – From a Perspective of a Russian Businessman
Zems – Live Journal
” … Naturally, the task is simple – we need to drop the rouble to the bottom, and then buy all the roubles that we can, giving away the dollars that are no longer needed and not guaranteed by anything. This will help concentrate all of the roubles inside the country …”
Saker ! your last sentence from this article
“
Maybe I am naive or primitive but I see only one way to reverse this death spiral: not only to fire Nabiulina, but to fully nationalize the Central Bank, fire the totality of its current top management and to appoint a new team with Sergei Glaziev as it’s director with a rank of Minister of Finance. Then Russia must take the strategic decision drop the current system of backing each printed Ruble with purchased US Dollar and instead back the Ruble with either energy or metals or a combo of real-word resources. My own vote would go for gold.
The Saker
Saker, I know Putin won’t do this because I have heard him say “Well, if I take more control (of the oligarchs) then what is that ?
Totalitarianism…and I’m not that”
Anyway, if Russia starts buying Roubles back in exchange for dollars then she can invest inside Russia…perfect….just what’s needed now…
bye.
Saker, what I think about the trolls is that when it becomes unbearable for you then post it on the thread so everyone can see it. That way you have a chance to read everyone else’s reaction and i think that will help you.
I don’t mind reading those stupid troll comments…and then its out in the open…like an infection…get it into the open air.
Break the link with the US dollar. Fix it to the exchange rate of oil or Yuan. Add Yuan to currency reserves and accept it for exports, not $. Establish currency controls. Re-denominate and confiscate to a different rate for changing money beyond 1 million roubles!
As far as investors go…they’re also part of the dying world…I would move to Russia and go through what they’re going through…even if it comes to war.
What did that wonderful Lebanese poet say ” grant that I am the victim and not the aggressor.”
Something like that. But Putin is even greater because he watches and makes his quiet moves…non-aggressive but very effective.
Just wait until the next chess move.
anon ” from Zerohedge
“The question is will Putin swallow his pride and proceed with the next logical step as the Eurasian axis realizes the time to abandon the dollar has long past, that …”
this is from Zerohedge….this is why I have reservations about that site. I used to go there every day and now I don’t…much better…
[from Blue]
A pure fiat money is like having a scale where you can turn the dial anywhere you want instead of measuring weight. Gold based money is like having a scale where the dial is glued in place. A good scale, and good currency, has a dial which reflects the true weight — the true state of production of real goods people need and want, and the true economic activity and trading of goods.
A gold standard is silly because gold is not the same as the actual economy; a society could function wonderfully with everyone living well even if gold never existed, but was based on food, tools, housing, clothing, education and culture, and other such things.
Gold is largely fiat money itself — dependent on arbitrary supply, demand, and perception, with various manipulations to suit those with power and public voice.
__Blue
Quoting Rob Kirby on Greg Hunter’s USAWatchdog.com
“The dollar isn’t getting stronger, just like stars aren’t going to have longevity when they go supernova. They get brighter and you might think the star is getting more viable when, in reality, the notion of it getting really bright before it goes supernova is exactly the opposite of the illusion of it getting brighter. It’s what happens just before it goes black and dies.”
Not only the Rubble but all currencies are in decline in relationship to the almighty dollar which is backed by $18 trillion + in debt. This does not make sense? Our $Can is now $.84 USD and falling.
I believe as does Kirby that we are seeing the dollar’s last blaze of glory and the only place to go is gold and silver and guess where most of it is, Russia, China, India.315
Putin ought not hold back on interfering w the present monetary/central bank system– at least not on the grounds that it is capitalism in action. The present system isn’t capitalism; it’s an oligarchic criminal device designed to make war on all except the hegemons.
There is certainly nothing free market about it.
Cheer up, Saker.
You have become too pessimistic lately with regard to Russia and Putin. And too simplistic on matters economic and financial.
We shall overcome
What is happening at this moment is WONDERFUL!
Before Russia can grow into a mature and independent major economy, it must be weaned from the Anglo-Zionist finance teet.
Everything happening right now is pushing Russia in exactly the right direction from the Eurasianist perspective.
Russia will soon be fully delinked from the US petrodollar system. If ever there were doubts about the need for Russia to achive total financial and economic independence, those doubts are now gone forever.
There are so many positives to consider.
A devalued ruble will put Russia in an excellent position to compete with lower wage BRICS and other rising economies. The EU will be priced out of the Russian market altogether and local manufacturers will get a big boost.
Right now they need CAPITAL. By now it should be apparent to everyone that the Russian Central Bank is working against domestic interests by spiking rates to 17%.
The Russian Central Bank, as a consequence of its treacherous behaviour, will have to be nationalized or replaced. There is no going back. The IMF fortress in Moscow will soon cease to be a threat.
Those who have debt in rubles and earnings in foreign currencies, including those in the defense and energy sectors, can pay off their domestic debts with a sharply devalued currency. Russia’s most vital strategic and domestically controlled economic sectors are generally shileded from the worst effects.
Those who have earnings in rubles but debts in foreign currencies, including many expat oligarchs and large foreign owned businesses, are going to see their business models turned upside down. Local buyers with pockets full of devalued rubles could easily sweep up everything if capital is made available. I agree with those calling on Russia to establish capital controls.
It seems this crisis is tailor made to benefit Eurasianist business interests. Everything that is happening will help Russia resovereignize its economy and severely reduce the influence of Atlanticist interests.
I don’t completely understand what is happening but I am convinced that everything is going perfectly for Putin and Russia. The Anglo-Zionists appear to be throwing everything they have into their latest salvo againt the Russian economy yet for every negative effect I can discern I can also think of several potential benefits, some very significant.
Stop panicking. Putin is winning by letting his opponents exhaust themselves completely.
Things are going swimmingly.
For all the panicphiles and “Putin should have fired the fifth column by now” types out there: can you imagine what would have happend if Putin had fired/ attacked Nabuillina & co on Friday last and we woke up to a ruble collapse this week?
First of all the panicphiles would have blamed Putin for the ruble collapse. So would the whole world. Any subsequent hardships would have been Putin’s personal fault, for firing the blessed liberal economic team.
Putin was no doubt aware that something like this could happen. I’m absolutely glad that the man is in charge of this crisis. Rather than some of us armchair generals who would have gone charging into Ukraine with the red army in february and locked up every russian liberal last month.
nobody is commenting on possibility of closing Siberia route to Pacific for Western airlines in retaliation for additional sanctions. as I understand airlines operate on verge of profit and this lengthening of routes would be a serious hit.
and new sanctions are coming on Friday.
The ruble’s fall is entirely explicable by the actions of currency speculators. Examine the pound during Soros’ attack.
Yes, oil prices and sanctions play a large part: sanctions because they reduce the ‘inertia’ of existing dollar/euro demand for rubles, and oil prices because these are a big factor in Russia’s ability to net foreign exchange which can in turn be used to fight said speculators.
The only way to combat these bastards is to stay the course. Putin has correctly stated that the ruble’s fall only accelerates the economic impact of sanctions on the EU and in turn encourages internal Russian development.
Or put another way: if Russia (or any other nation) had unilaterally undertaken such a devaluation – the screams of “currency manipulation” would be detectable from other planets.
Backing money with gold or other commodities is a ludicrous idea. If I must explain the reasons and rationality behind this statement then doing so is not worth my efforts. Suffice it to say, it shows an absolute lack of an understanding of money and what money is. I’ll make one simple statement more and leave it at that. “A growing economy requires a growing amount of money”; that is fact. The most important fact is simply, it’s not quantity of money but what is done with it that is of utmost importance. Gold acts simply as a store of value. It is not money. Take a moment and do some reading at the American Monetary Institute, Dr. Steven Zarlenga, website and/or the Monetative website and the writings of Dr. Joseph Huber. You might enlighten yourself a bit. You’ll certainly find what real monetary reforms that serve public purpose and national economies consist of.