Posted on 03/03/2014 5:02:44 PM PST by 1rudeboy
Russia's Micex stock index fell 11% on Monday and the ruble hit an all-time low after Vladimir Putin's weekend invasion of Ukraine's Crimea peninsula. The sour reaction suggests that investors understand that Mr. Putin's Achilles' heel is the Russian economy and its access to world financial markets, if the West has the wit and will to exploit it.
The conventional wisdom in the pundit class is that Russia holds the economic edge because of its natural gas supplies to Ukraine and much of Europe. But that supply is a double-edged sword because Russia needs the foreign-exchange earnings as much as Europe needs the gas. With enough stockpiles to get through the rest of the winter, Ukraine and Europe are also less subject to immediate energy blackmail.
More broadly, the Russian economy is no global tiger. Last year it grew 1.3% and the ruble has been among the currencies hit hardest by the flight away from emerging markets as the U.S. Federal Reserve tapers its bond purchases. Russia's central bank raised its benchmark interest rate to 7% from 5.5% on Monday to stop further flight.
Russia's economy continues to be largely an oil commodity play that has diversified little thanks to Mr. Putin's treatment of foreign and domestic investors. As in most authoritarian regimes, Russia's economy is top-heavy and built on favors for oligarchs who do what the Kremlin wants. Do otherwise and you end up in Siberia like Mikhail Khodorkovsky, or dead like anti-corruption lawyer Sergei Magnitsky.
No one knows this better than the Russians themselves, which is one reason they are so eager to negotiate a bilateral investment treaty with the U.S. They know most foreign investors won't come in without more protective rules. The U.S. should shut down these talks.
(Excerpt) Read more at online.wsj.com ...
Yeah yeah. And if America had a President. Dreams
The west is teetering on the financial brink themselves. China sides with Russia.
We won’t piss off China, who owns all our debt, on some silly theory that we have financial leverage by blackballing Russia.
Not sure where you want to go with this . . . if I owe someone money, I’m not afraid of pissing them off at all.
Our national debt is less than 5 yr maturity. We are essentially on an ARM. Financial leverage works both ways.
By reducing purchasing China can easily push our interest rates higher quickly.
Its arrogance, in this article, to think we can push the East around financially anymore. Those days are behind us now.
Pooty probably has that pic hanging in his office.
Something interesting:
12/12/13
Ukrainian President Viktor Yanukovych escaped protests in his country last week with a state visit to Beijing, where he received China’s pledge to protect Ukraine under its nuclear umbrella.
On Dec. 5, Mr. Yanukovych and President Xi Jinping signed a bilateral treaty officially pronouncing that China and Ukraine are now “strategic partners.”
“China pledges unconditionally not to use or threaten to use nuclear weapons against the nuclear-free Ukraine and China further pledges to provide Ukraine nuclear security guarantee when Ukraine encounters an invasion involving nuclear weapons or Ukraine is under threat of a nuclear invasion,” said a joint statement on the pact.
China’s official media, including Xinhua and Global Times, touted the deal with the headline “China Pledges Nuclear Umbrella to Protect Ukraine.”
Read more: http://www.washingtontimes.com/news/2013/dec/12/inside-china-ukraine-gets-nuke-umbrella/#ixzz2ux7Pd56T
Follow us: @washtimes on Twitter
Again, not sure why you think the Chinese eating all the dollars they have in order to raise our Treasury rate up by a few notches is bad. Might be the best thing to happen to us.
Indeed.
We are seeing this shift across a lot of territory. East is on the rise west on the wane.
Its hard to get upset about the Ukraine. The west funded a bunch of dunderhead revolutionaries, like we are doing in Syria, that were completely unable to hold power once they toppled the sitting government.
Near term the Ukraine will be better off with Russia than with the West.
We may as well make the most of this situation. Putin invades Ukraine’s Crimea peninsula and Obamadon’tcare.
Says some guy sitting behind the safety of his computer keyboard.
We may as well make the most of this situation. Putin invades Ukraine’s Crimea peninsula and Obamadon’tcare.
Push interest rates higher? Newsflash, the FED manipulates interest rates, and have held them artifically low for at least the last 5 years. Also, if we told China to go suck an egg on the debt they hold, what are they gonna do? We buy all thier junk. They would be back plowing fields with sticks and oxen, without a market here.
The Russian achilles heel is all the toys and property in the US and Europe bought with money stolen from Russia. Just expropriate the oligarchs businesses and property in the west. Tell the Russians to behave or they are forfeited.
Start with Chelsea soccer team. That’s worth about a billion right there. Many billions in hard assets should be frozen pending the outcome of Putin’s latest adventure. So far it seems Germany is too chicken to do it.
The Russian achilles heel is all the toys and property in the US and Europe bought with money stolen from Russia. Just expropriate the oligarchs businesses and property in the west. Tell the Russians to behave or they are forfeited.
Start with Chelsea soccer team. That’s worth about a billion right there. Many billions in hard assets should be frozen pending the outcome of Putin’s latest adventure. So far it seems Germany is too chicken to do it.
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Yep....that’s Russia’s other Achilles heel. If the Western governments froze those assets, that sound you’d be hearing is the sound of Russian oligarchs, Putin included, suddenly and simultaneously soiling their $100 underwear.
Thanks 1rudeboy.
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