Russia raises rates in emergency move as ruble collapses


#1

Russia raises rates in emergency move as ruble collapses: reut.rs/1yTNnEW


#2

Perhaps Russia could save money if it kept its Air Force, Army, and Navy at home instead of trying to compete with China to see who is the biggest bully on the block :D.

Pax
Linus2nd


#3

None of them come close to the king of bullies the US. Perhaps if Russia or maybe China could get more powerful they could ruin other countries currencies while being big hypocrites:D


#4

Did we put sanctions against Russia? Is that why ruble is collapsing?
I read they are raising interest rate to 17%.
I don’t want to see Russia collapse. We already accept too many refugees!


#5

Some took a hit in foreign-exchange derivatives.

Russian companies lost tens of billions of rubles on foreign-exchange derivatives amid a rout in the ruble, Interfax reported, citing Sergey Moiseev, the head of financial stability at the central bank.

Companies were forced to close out the contracts after the central bank’s move to a free-floating exchange rate exposed them to the world’s highest currency volatility amid a slump in oil prices, Moiseev said, according to Interfax. Most of the transactions were terminated ahead of schedule, triggering penalties, or were restructured, the report said.

businessweek.com/news/2014-12-10/russian-companies-lost-billions-on-ruble-hedges-interfax-says

I wonder if this crisis may have triggered some large credit default swaps (in that hazy world of financial instruments)?

The amounts of money won and lost during a currency crisis can be mind boggling.


#6

The war in Ukraine is one factor. Another very large factor is the drop in oil prices worldwide (and OPEC’s recent decision not to cut production). The Russian economy is heavily based on oil, and so the dramatic drop in price recently has hurt the Russian currency considerably.

Edited to fix word – OPEC production, not prices.


#7

One economist calls Russia’s economic meltdown an “unrecoverable spiral.”

What is happening to Russia’s economy? Russia faces a full-blown financial crisis, triggered by a sharp plunge in oil prices since this summer and international economic sanctions related to its actions in Ukraine. The ruble is collapsing. The currency fell to a record low on Monday after losing 10 percent of its value, its steepest drop since the 1998 Russian financial crisis – it is down more than 60 percent this year.

“The end is near for Russia’s economic and financial stability,” said Carl Weinberg, chief economist with High Frequency Economics, in a note. “This is an unrecoverable spiral. The combination of economic and financial sanctions by NATO governments and the crash of global oil prices has killed Russia’s economy.”

How is Russia responding to the crisis? The Central Bank of Russia (CBR) surprised financial markets overnight by abruptly jacking up interest rates from 10.5 percent to 17 percent. The goal is to shore up the ruble, including the exchange rate with other currencies; maintain fiscal stability; forestall inflation; and discourage global investors from pulling their capital out of Russia. Of particular concern for policymakers is whether Russia has enough money in reserve to weather the decline in oil prices and its growing isolation from global capital markets.

The CBR has made a number of moves in recent months to soften the blow from sanctions and the drop in energy prices, with limited effect. The ruble continued to fall Tuesday ever after the massive rate hike, while gauges of financial risk, such as the price of credit insurance on Russian debt, are flashing red.

cbsn.ws/1vVZYVY


#8

Breaking: POTUS will sign Russian sanctions bill. WH econ types say sanctions/oil prices/uncertainty have Russia on “brink of crisis.” twitter.com/MajorCBS/status/544903649491968001

I wonder how Putin will respond? I suspect he will consider it an act of war or something close to it.


#9

According to the Guardian. The US and Saudis are behind the drop in oil prices in a bid to ruin Russia’s economy

The west knows all about the vulnerability of Russia’s economy. When the introduction of sanctions over Russia’s support for the separatists in Ukraine failed to bring Vladimir Putin to heel, the US and the Saudi Arabians decided to hurt Russia by driving down oil prices. Both countries will face some collateral damage as a result – and this could be considerable in the case of the US shale sector – but both were prepared to take the risk on the grounds that Russia would suffer much more pain. This has proved to be true.theguardian.com/business/2014/dec/16/russia-has-lost-economic-war-with-west-rouble-currency


#10

The pressure doesn’t look to be letting up. Vladimir Putin will almost certainly become more aggressive if the crisis depends. I just hope the Western leaders do not underestimate him.

Russian corporations and banks are scheduled to repay $30 billion in foreign loans this month.

And next year, about $130 billion will come due. There is no obvious source for these hard currency payments other than the central bank, whose credibility is now being called into question.

nytimes.com/2014/12/17/business/russia-ruble-interest-rates.html


#11

The US has really no influence on oil prices and in fact, cheap oil hurts US oil producers.

The kingdom has two targets in its latest oil war: it is trying to squeeze U.S. shale oil—which requires higher prices to remain competitive with conventional production—out of the market. More broadly, the Saudis are also punishing two rivals, Russia and Iran, for their support of Bashar al-Assad’s regime in the Syrian civil war. Since the Syrian uprising began in 2011, regional and world powers have played out a series of proxy battles there.

While Saudi Arabia and Qatar have been arming many of the Syrian rebels, the Iranian regime—and to a lesser extent, Russia—have provided the weapons and funding to keep Assad in power.

cnbc.com/id/102271857#

For the Saudis it is the perpetual Sunni v Shiite war.


#12

One recalls that Obama traveled to Saudi Arabia when the Ukraine crisis heated up significantly. One doubts Obama would enter into an agreement with S.A. to drop oil prices for the purpose of squeezing Russia, but he might have.

Obama is not keen on cheap and abundant energy in the U.S., and I doubt he would care very much if the frackers got hit at the same time. His radical environmentalist supporters would love it and reward him for it if they thought he engineered injury to them.

From the Saudis’ standpoint, I could certainly see them wanting to stop fracking in the U.S. and the rest of the world, as well as hurting Assad and Iran.

Putin’s slow motion conquest of Ukraine is undoubtedly very expensive for Russia. Since he and his supporters have industries and other resources to loot in Ukraine just as they have looted Russia, he probably doesn’t care, up to a point.

But there is a point at which he’s either going to simply stifle any dissent by main force, or provide the Russian people with some kind of satisfaction. Will additional conquests be enough to do that, or will increasing poverty be assuaged by his undertaking even greater foreign adventures?


#13

Your citation of the debts Russian banks and corporations have coming due reminds me of the beginning of the collapse of the Soviet Union occasioned when it couldn’t get more western money by forcing Poland to borrow money from the west and funnelling it back to Moscow. Poland’s credit line ran out, and things started falling apart from there.

Might not be that bad this time.


#14

Yeah, it was huge that Poland lost its creditworthiness. The loss of production and good old’ Lech Walesa causing problems for the Communists. Btw, he is still talking Solidarity but his geographical region has expanded to all of Europe.

The Soviet coal miners’ strike let the Soviets know perestroika and glasnost didn’t inspire them either. It was history from there.

This doesn’t look like the 1998 financial crisis in Russia…since the Paris Club of creditor nations isn’t calling to help.

This crisis may be another transforming one for Russia – unless the price of oil bounces real soon or Putin does the highly unlikely, reverses things in the Ukraine.

We’ll see how bad it gets…but there’s a lot of talk about some poor monetary policy so far in Russia.


#15

And meanwhile the acting Ukrainian government’s new Minister of Finance. Natalie Jaresko is a US citizen who worked for the US State Department, but we’re still supposed to believe that the American government and it’s allies weren’t behind the Euromaidan movement.

                         [reuters.com/article/2014/12/02/us-ukraine-crisis-poroshenko-technocrats-idUSKCN0JG1ET20141202](http://www.reuters.com/article/2014/12/02/us-ukraine-crisis-poroshenko-technocrats-idUSKCN0JG1ET20141202)

One of the three is Natalie Jaresko, a U.S. citizen and chief executive of private equity group Horizon Capital. She has worked in Ukraine for more than 20 years after holding various economic positions in the U.S. State Department.


#16

themoscowtimes.com/article/513550.html

Yes, those falling gas prices that Americans are enjoying at the pump are punking oil producers with high overhead, most notably Russia, which is experiencing a ruble meltdown paralleling the Weimar Republic in Germany where cash was carried in a wheelbarrow. Apple has raised prices; and Swedish furniture and houseware maker IKEA shut down to stabilize supplies and rework prices for goods that were flying off the proverbial shelves.

So anyone for vacationing at a beautiful Baltic resort? Russia may be competing with Cuba for your va-cay dollars. Caviar or cigars? Your option. I’d like a set of Arctic fox fuzzy dice, please. SISTERS IN JESUS THE LORD, located in Kansas City, and ministering in Russia, would like you to prayerfully consider getting a mega-bang for your American buck and a tax write-off and riches in Heaven by donating to their boonies ministries in Russia that include reversing the trend of five (5) abortions per Russian female, and teaching how to farm efficiently without chemicals after decades of collectivized underachieving.

cjd.cc/ministries.html

“Russia will spread her errors…Pray the daily Rosary for peace.” --Our Lady of the Rosary, Fatima, Portugal 1917


#17

American visitors to Russia are required to pay their expenses in U.S. dollars, so a falling exchange rates is of no benefit to them. Actually, while lower gas prices are nice in the short term, no one benefits from an unstable Russia.


#18

You can say that again…NO ONE BENEFITS FROM AN UNSTABLE RUSSIA. May the Immaculate Heart of Mary triumph, reign and rule.


#19

Ukraine may well benefit from the Putin regime being destabilized.


#20

When I was in Russia around 2000, I exchanged about $100 at the official rate and got a receipt, then informally swapped out a bunch at market rate. Individuals still liked dollars, but I was never obliged to use them.


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