Russia and the rubble...

[Supercilious]

Interesting news from Russia:
http://www.bloomberg.com/apps/news?p...FlI&refer=home

Feb. 2 (Bloomberg) -- The ruble slumped to its weakest level against the dollar in 11 years as investors speculated Russia will be forced to give up its currency defense after draining reserves.
The ruble lost as much as 1.7 percent to 36.3550 per dollar, nearing the weakest end of a trading range widened by the central bank less than two weeks ago. Bank Rossii Chairman Sergey Ignatiev pledged on Jan. 22 to use reserves to keep the currency at a level of 41 against a basket of dollars and euros, which translated to 36 per dollar. Based on current euro-dollar rates, the ruble would need to fall to 36.45 per dollar to break the band, according to Merrill Lynch & Co. A central bank spokesman declined to comment.

[...]
The central bank raised its benchmark one-day and seven-day interest rates through loan auctions on Jan. 30 to make borrowing money to speculate on the ruble more expensive. Bank Rossii lent 7.7 trillion rubles ($213 billion) to Russian banks in so-called repo auctions last month, aiding the ruble’s depreciation as lenders converted the funds into foreign currency, according to UniCredit and ING Groep NV.

[...]
Finance Minister Alexei Kudrin said last week Russia will probably have growth near “zero” this year. Along with increasing interest rates, Russia is “probably days away” from instituting some kind of controls on transfers of currency out of the country, Fenkner said. “They’re going to really reign in money supply,” he added.

Probably by now, all siliviki and friendly oligarchs have already got most of their piggy bank money out of Russia, therefore the government can start implementing capital controls

[metalman]

Re: Russia and the rubble...

Interesting news from Russia:
http://www.bloomberg.com/apps/news?p...FlI&refer=home




Probably by now, all siliviki and friendly oligarchs have already got most of their piggy bank money out of Russia, therefore the government can start implementing capital controls

it's 1993 all over again, but with oil thugs instead of gov't thugs.

[metalman]

Re: Russia and the rubble...

Interesting news from Russia:
http://www.bloomberg.com/apps/news?p...FlI&refer=home




Probably by now, all siliviki and friendly oligarchs have already got most of their piggy bank money out of Russia, therefore the government can start implementing capital controls

it's 1993 all over again, but with oil thugs instead of gov't thugs.

[cbr]

Re: Russia and the rubble...

trust me, there are no Russian big money thugs left in the world that have not been heeled by Putin and his intelligence agency.

[Supercilious]

Re: Russia and the rubble...

it's 1993 all over again, but with oil thugs instead of gov't thugs.

Yep, basically the siloviki supported oligarchs (because it's not just oil and gas) are used to defraud Russia. It's deja vu all over again.

And to give credit where it is due, I'll said again, as I've said before, that I believe EJ's call on Russia going through a textbook Ka-Poom was absolutely right.

I hope c1ue is on top of things with his money in dollar denominated Russian bonds.

[c1ue]

Re: Russia and the rubble...

Sorry, I don't touch Russian stocks or bonds.

It is all cash, 50/50 dollar and ruble - although ongoing revenue is all ruble.

But some previously uninteresting investments are starting to get interesting.

Clearly the ruble is under attack between Russians scared of a repeat of 1998 and foreigners taking money back home.

My own view is that the present situation will pass in 2 years or less, but the government can't stand by and do nothing.

I'd recommend the Russian government buy out the key assets in the big oligarch holding companies with its foreign reserves, put in a safety net for citizens, then let the ruble fall (and remaining debt default). Then restart

[jacobdcoates]

Re: Russia and the rubble...

Clue1,

I'll admit that I have only followed the Russians problems in passing, but wouldn't a 2nd debt default in ~10 years, risk making them the Ecuador of Europe(a serial defaulter). Although I suspect that there will be a great many sovereign default; either by eventual inflation(after a bout of deflation) or outright default.

[GRG55]

Re: Russia and the rubble...

"Russia and the rubble... "

Rubble sounds like an apt description for what will remain.

"...debris: the remains of something that has been destroyed or broken up..."

Deliberate on your part, or just a Freudian slip...? ;)

[c1ue]

Re: Russia and the rubble...

I'll admit that I have only followed the Russians problems in passing, but wouldn't a 2nd debt default in ~10 years, risk making them the Ecuador of Europe(a serial defaulter). Although I suspect that there will be a great many sovereign default; either by eventual inflation(after a bout of deflation) or outright default.

Jacob,

You are right, a 2nd sovereign debt default would be bad.

But the debt isn't owed by the Russian government. The Russian government is pretty well balanced between debt and foreign reserves.

The debt I speak of is the $360B or more which the top 100 companies in Russia (read Oligarch's playthings) have taken on.

The problem as I see it was that in a certain sense, the 'New World Order'istas are right: Russia's corruption - or rather lack of regulation - is what allowed this situation to occur.

But it isn't that someone was bribed to overlook some leverage ratio or what not - although I'm sure that has happened.

It was that those rules don't exist.

And in the relative backwater that is the Russian stock and bond markets, there simply weren't any 'bond vigilantes' to feed back that what these companies were doing was bad business. And so they kept on going.

Now the question is as these pyramids of debt collapse, what will arise in its place?

The key is going to be 1) if the good parts are salvaged, 2) if the past mistakes are prevented from happening again, 3) that a more honest (i.e. competitive) business infrastructure arises from the ashes.

Of course, this could equally be said about the US and Europe!

[cobben]

Re: Russia and the rubble...

Rusia as I see it is in a similar position as most western countries, though it got there by a different route:

Now that Putin, Inc. has domesticated the remaining oiligarchs and brought them into the guvm'nt fold, they - just like the western crony banksters - are considered "too big to fail" (which really means too connected to be allowed to fail).

Thus the Russian people is on the hook for paying off the foreign denominated debt that the oligarchs inflated their empires with.

Sure, just like Iceland as a nation would have been better off letting the banks default, Russia as a nation would be better off if the oligarchs' empires were allowed to crash. The state could secure/confiscate/nationalize the important resource assets and restructure after the foreign creditors were wiped out.

Everyone recalls I hope that Medvedyev was the CEO of Gazprom.
Not only in the US are revolving doors between biznes & guvm'nt.

[metalman]

Re: Russia and the rubble...

"Russia and the rubble... "

Rubble sounds like an apt description for what will remain.

"...debris: the remains of something that has been destroyed or broken up..."

Deliberate on your part, or just a Freudian slip...? ;)

ha! didn't notice til you pointed it out. very funny.

[c1ue]

Re: Russia and the rubble...

Rusia as I see it is in a similar position as most western countries, though it got there by a different route:

Now that Putin, Inc. has domesticated the remaining oiligarchs and brought them into the guvm'nt fold, they - just like the western crony banksters - are considered "too big to fail" (which really means too connected to be allowed to fail).

Thus the Russian people is on the hook for paying off the foreign denominated debt that the oligarchs inflated their empires with.

Ah, but there is a key difference, cobben.

In America. the bad debt is held by American (and European) banks which have strong (some might say controlling) influence in the governments of the 2 areas.

Russian corporate debt, while some is held by Russian banks, a lot of it is owed to European and American banks. And these banks DON'T have strong influence in the Russian government. In fact, as many Russian leaders are large shareholders in some of the companies - notably Gazprom - the opposite is true.

It takes time, however, to effect the separation of debt and key pieces of collateral. In the meantime, a worsening of the situation means an acceleration of the need to get any cash infusion possible.

If things weren't that bad, the companies in question would shuffle forward zombie like for years.

[Supercilious]

Re: Russia and the rubble...

"Russia and the rubble... "

Rubble sounds like an apt description for what will remain.

"...debris: the remains of something that has been destroyed or broken up..."

Deliberate on your part, or just a Freudian slip...? ;)

Well, I'm trying to emulate Mega

[VIT]

Re: Russia and the rubble...

Everyone recalls I hope that Medvedyev was the CEO of Gazprom.
Not only in the US are revolving doors between biznes & guvm'nt.

It is not quite the same. Gazprom is a "special department of state" where is in US its more likely to be vice versa.