Can you smell the books a cookin? It's amazing we have these low unemployment numbers right before an election...and then right after the election, they come back with 'oh, we released bad data, we're correcting it now
"
That's EXACTLY what's going on.
"God's an old hand at miracles, he brings us from nonexistence to life. And surely he will resurrect all human flesh on the last day in the twinkling of an eye. But who can comprehend this? For God is this: he creates the new and renews the old. Glory be to him in all things!" Archpriest Avvakum
Cyber-criminals will trigger the next global financial crisis by making a major bank “disappear”, one of the UK’s leading finance chiefs has claimed.
Mark Boleat, head of policy for the City of London, said cyber-criminals would go about “destroying bank records and changing the amounts people have in their accounts”, sending shockwaves through the financial system like a “neutron bomb”.
People would find that their savings have been wiped out, their records deleted, and they would come up against “denials of service”, stopping them from accessing funds, Mr Boleat told The Sunday Telegraph. The attack would bring much of the financial world grinding to a halt, and render the targeted bank useless, he warned. “A bank will disappear – a national bank.”
The doomsday scenario has echoes of The Girl with a Dragon Tattoo, the novel by Stieg Larsson which was adapted for the big screen, in which the protagonist empties someone else’s bank account by hacking into the company’s systems and artificially changing the balance.
Mr Boleat said that the City of London police had uncovered a “huge underground economy, and a huge underground network” capable of this sort of manipulation, he said financial institutions needed to invest heavily in protecting the online security of their customers. “You can go into the market and hire people to do whatever you want. There are cyber-criminals who, if you want them to go into a system, they will.”
Mr Boleat was speaking as he prepared to address the Institute of International Finance in Washington this weekend on the threat of cyber-crime.
The dramatic picture follows a series of security breaches, and echoes a similar warning from Benjamin Lawsky, one of America’s most influential financial regulators, as officials on both sides of the Atlantic become increasingly concerned about the scale of the threat.
Mr Lawsky, superintendent of the New York State Department of Financial Services, said last month that it was only a “matter of time” before there was an “Armageddon-style” cyber-attack on the global financial system.
He drew comparisons with the 9/11 terrorist attack on New York’s World Trade Centre, which crippled financial confidence around the world, as he urged the public to invest in preventing a cyber-disaster.
A number of major institutions have recently fallen victim to cyber-attacks. Perhaps the most alarming was JP Morgan, America’s largest bank, which admitted last month that cyberattackers accessed the information of 76m households and 7m small businesses over the summer
The hackers accessed the names, phone numbers and email addresses of more than a quarter of the US population during a June cyber attack, as they attempted a raid on at least six US financial institutions. They do not appear to have stolen any money, but officials are alarmed that the cyber-criminals were able to gain any access at all.
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Rouble plummets as analysts warn of currency crisis
Currency weakens to over 48 roubles per dollar for first time in opening minutes of trading
An employee counts Russian Rouble banknotes at a private company’s office in Krasnoyarsk, Siberia. The rouble opened sharply weaker against both the dollar and the euro on Friday
The rouble plummeted on Friday, falling over 3 per cent against both the dollar and the euro after the central bank relaxed its exchange rate policy, with analysts warning a self-fulfilling currency crisis could be under way.
The rouble weakened to over 48 roubles per dollar for the first time in the opening minutes of trading. A short time later it was trading 3.5 per cent weaker from the previous close, at 48.52 against the dollar.
The Russian currency was also 3.5 per cent weaker at 60.09 against the euro. Currency dealers said the rouble was already valued at around 60 versus the euro and at 48.5 versus the dollar in pre-exchange trading.
“This is full-blown panic, with signs of a self-fulfilling currency crisis,” Dmitry Polevoy, chief Russia economist at ING Bank in Moscow, said in a note. “At such times, the central bank should intervene, after all if this isn’t a risk to financial stability, then what is?”
On Wednesday, the central bank altered its interventions policy to limit its support for the Russian currency by cutting the size of its interventions to $350 million a day, barring threats to financial stability.
The bank’s ultimate objective is to float the rouble and shift to an inflation-targeting regime.
Plunging oil prices and Western sanctions over the Ukraine crisis have shrivelled Russia’s exports and investment inflows, driving the rouble lower over several months.
But the rouble has taken a particularly heavy hit since the beginning of October, with the central bank spending around $30 billion to prop up the ailing currency, its largest monthly interventions in over five years.
On Friday, talk of renewed fighting in eastern Ukraine, where both sides have accused each other of violating a fragile ceasefire, added further pressure to Russian assets.
So too did weaker prices for oil, one of Russia’s key exports, as Brent crude futures dropped below $83, near a four-year low. Major price falls are capable of blowing a huge hole in the country’s balance of payments.
“We think the rouble’s 30 per cent depreciation year-to-date clearly poses certain risks for financial stability, as not many will have assumed such a dramatic price action when doing their business planning,” said Maxim Korovin, a forex analyst at VTB Capital in Moscow.
“Although some increase in geopolitical risks yesterday added to FX volatility, the key pressure on the rouble is most likely now primarily from households, which is a self-fulfilling process,” he said.
Russian shares were also sharply lower on Friday, with the dollar-denominated RTS index reaching a five-year low below 1,000 points, weighed down by the weaker rouble. Reuters
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Banks closed more than 1,600 branches across the nation over the past year, as companies directed more attention to dealing with customers through digital channels.
The 1.7-percent reduction in the number of branches between mid-2013 and mid-2014 was reported by researcher SNL Financial and based on reports filed with the Federal Deposit Insurance Corp. SNL said the consolidation was fueled by banks' desire to cut costs and divert more resources to digital services. In some states, mergers and acquisitions resulted in the shuttering of some duplicative branches.
It was the largest annual branch reduction since the FDIC began reporting electronic records in 1994, according to SNL Financial's report. It brings the nation's branch count back down to 2006 levels. But it didn't dim the ability of banks to attract deposits. Overall deposits hit $10.1 trillion at midyear, up from $7.6 trillion when the number of branches peaked in 2009.
Among the big three banks operating in Arizona, Chase cut 15 branches nationally while Wells Fargo added 17, according to SNL Financial. Both moves represented changes of less than 0.5 percent in the branch totals of those two institutions. But Bank of America shaved 305 offices or 5.6 percent of its nationwide total.
Arizona lost 2.2 percent of its branches over the past year, according to SNL Financial. That was a notable hit, though various other states did worse in percentage terms, including Arkansas, Illinois, Indiana, Maryland, North Carolina, Pennsylvania and Virginia. Only Hawaii and New Mexico added branches, while Wyoming was flat.
Arizona's decline to roughly 1,340 branches comes as a surprise, given that the state continues to add population and already counts fewer bank locations than roughly 15 states that are smaller, such as Alabama, Arkansas, Kansas, Kentucky, Mississippi and Oklahoma.
Also, Arizona hasn't had any major banking mergers in recent years.
Branches aren't the main way for customers to do business with their banks, though a recent survey found that they continue to be viable. An American Bankers Association survey released in August found that 31 percent of consumers mainly bank via the internet using personal computers or laptops. That was the most popular channel, followed by branches at 21 percent, ATMs at 14 percent and cellphones and other mobile devices at 10 percent, with the remaining responses split among telephone, mail and no preferences.
"It's clear that branches are still popular with many bank customers," said Nessa Feddis, a deputy chief counsel at the American Bankers Association, in a statement.
In fact, the latest ABA survey found a slight increase in branches as the most popular banking channel, rising from 18 percent in the 2013 poll. Mobile and ATM use also gained, while internet banking through laptops and PCs fell from 39 percent. Many customers clearly use multiple channels, but the ABA poll asked them to name the one they use most often.
"When people are conducting a complex transaction like opening an account or applying for a home or business loan, they often prefer to do it in person," said Feddis. "We're seeing a branch renaissance in some areas, with many banks transforming their branches to become more efficient and customer-friendly."
Some firms also are using branches as places where customers can go to receive help in conducting business over the internet or through electronic devices.
Odds are your vision includes a home with two kids, as well as two or more cars.
But according to a new study by KPMG, that image is becoming a less common reality. As a growing number of consumers participate in car sharing, wait longer to buy their first vehicle and move to the suburbs, KPMG predicts that in about 25 years, fewer than half of U.S. households will own more than one vehicle.
"We think that the two-car family, over time, it is not going to go down to zero, but a significant amount of people are going to reduce that number," said Gary Silberg, a partner at KPMG who conducted the study.
According to the report, 57 percent of American households currently have two or more cars. Although that percentage has held relatively steady over the last couple of decades, Silberg forecasts it will fall to 43 percent by 2040. That's thanks, in part, to the growing popularity of ride-share companies.
"It is already happening right now. Look at the number of Uber drivers and Lyft drivers," Silberg said. "We think the shared economy is going to be the economy of the future, certainly in automotive."
Another trend the industry's watching is the fact that many people are waiting to buy their first new car. For decades, automakers have counted on hooking buyers when they're young, and keeping them in the corporate family as they age and buy new models.
But in 2012, automotive research firm Polk estimated the average American would buy four fewer new vehicles in their lifetime, compared with a similar study conducted before the recession. Changing demographics and economics have forced families to reconsider how many automobiles they need.
"The average price of a car is around $31,000. The minute you drive it off the lot you lose 11 percent," Silberg said. "Owning a car is not the most rational economic decision."
Of all the trends pushing families away from owning more than one car, urbanization may be the least appreciated.
But as metropolitan areas grow, so does congestion, and that's forcing families to decide it's easier to use companies such as Uber. As a result, the percentage of American households with at least two cars is much smaller for those living in cities such as New York and Chicago.
"This trend is clear," Silberg said. "More people are moving to cities and suburbs where congestion and costs will make them say they don't need two cars."
Silberg said it's possible that the number of vehicles in the U.S. could start trending lower over the next 20 years, as more families decide not to buy a second car. That could have big implications for automakers' top lines.
But Joe Hinrichs, president of the Americas for Ford, said it's too soon to declare the end of the two-car family.
"It is still a big part of America," he said. "It is suburbia, going to work, going to school. It is going to be a big part of the future, as well."
Last week, total US debt was a meager $17,963,753,617,957.26. Two days later, as updated today, on Black Friday, total outstanding US public debt just hit a new historic level which probably would be better associated with a red color: as of the last work day of November, total US public debt just surpassed $18 trillion for the first time, or $18,005,549,328,561.45 to be precise, of which debt held by the public rose to $12,922,681,725,432.94, an increase of $32 billion in one day.
It also means that total US debt to nominal GDP as of Sept 30, which was $17.555 trillion, is now 103%. Keep in mind this GDP number was artificially increased by about half a trillion dollars a year ago thanks to the "benefit" of R&D and intangibles. Without said definitional change, debt/GDP would now be about 106%.
It also means that total US debt has increased by 70% under Obama, from $10.625 trillion on January 21, 2009 to $18.005 trillion most recently.
And now we wait for the US to become Spain, and add the estimated "contribution" from hookers and blow to GDP, once again pushing the total debt/GDP ratio below the psychological 100% level.
Friday's turbocharged jobs headline came thanks to seasonal adjustments and other wizardry at the Bureau of Labor Statistics, which reported that U.S. job growth hit 321,000 even as the unemployment rate held steady at 5.8 percent.
Those numbers, courtesy of establishment survey estimates, sound nice on the surface, and they certainly present reasons if not for unbridled optimism then at least confidence that the job market continues to mend and is on a pretty steady trajectory higher.
However, the household survey, which is an actual head count, presents details that show there's still plenty of work to do.
A few figures to consider: That big headline number translated into just 4,000 more working Americans. There were, at the same time, another 115,000 on the unemployment line. That disparity can be explained through an expanding labor force, which grew 119,000, though the participation rate among that group remained at 62.8 percent, which is just off the year's worst level and around a 36-year low.
But wait, there's more: The jobs that were created skewed heavily toward lower quality. Full-time jobs declined by 150,000, while part-time positions increased by 77,000.
Analysts, though, mostly gushed over the report.
Fixed income strategist David Harris at Schroders said it was "unquestionably strong and significantly exceeded expectations." Economist Lindsey Piegza at Sterne Agee called it "impressive," while Paul Ashworth at Capital Economics termed the headline gain "massive" with "labor market conditions improving at breakneck speed."
As for the unseemly nature of the internals, Michelle Meyer of Bank of America Merrill Lynch said the "gift" of a report should override those concerns.
"Household jobs were only up 4,000, which on the surface is a disappointment. However, this follows an outsized gain of 683,000 in October and 232,000 in September, leaving the three-month moving average still up a healthy 306,000," Meyer said in a report for clients. "The monthly survey of household jobs tends to be quite noisy, suggesting caution when reacting to a given month of data."
But there were several other points not to like in the report.
Families, for instance, also were under pressure: There were 110,000 fewer married men at work, while married women saw their ranks shrink by 59,000.
And there was an exceedingly huge disparity between expectations and results: ADP's report Wednesday showed just 208,000 new private sector positions, compared with the 314,000 in the BLS report. That's a miss of 51 percent, the worst showing for ADP's count since April 2011 even though the firm has touted its partnership since then with Moody's Analytics as a way to make its count more accurate.
Some Wall Street analysts had been scaling back their calls, and Goldman Sachs, which has had a good history of picking the number, was expecting gains of 220,000. Even the most buoyant economist on the street, Joe LaVorgna at Deutsche Bank, was looking for 250,000.
Finally, there was a rather startling numerical coincidence: That same 321,000 figure was repeated later in the report—as the total number of bar and restaurant jobs created over the past 12 months.
Taken in total, a peek beneath the hood of these numbers suggests a job market that still has a ways to go.
Exactly 199 years ago, in 1815, a “temporary” committee was established in the US Senate called the Committee on Finance and Uniform National Currency.
It was set up to address economic issues and the debt accrued by the US government after the War of 1812.
Of course, because there’s nothing more permanent than a temporary government measure, the committee became a permanent one after just one year.
It soon expanded its role from raising tariffs to having influence over taxation, banking, currency, and appropriations.
In subsequent wars, notably the American Civil War, the Committee was quick to use its powers and introduced the union’s first income tax. They also detached the dollar from gold to help fund the war.
This was all an indication of things to come.
Over the subsequent decades there was a sustained push to finally establish the country’s central bank that will control money and credit, as well as institute a permanent income tax to feed the expanding aspirations of government.
They succeeded in 1913 when the Federal Reserve Act was passed and the 16th Amendment ratified, binding the country in the shackles of central banking and taxation of income.
Over the century that followed, the US has gone from being the biggest creditor in the world to its biggest debtor.
Decades of expanding government programs, waste, endless and costly wars, etc. have racked up such an enormous pile of debt that it has become almost impossible to pay it down.
A lot of folks don’t realize that, since the end of World War II, the US government’s total tax revenue has been almost constant at roughly 17% of GDP.
In other words, even though the actual tax rates themselves rise and fall, the government’s ‘slice’ of the economic pie is almost always the same - 17%.
I’ve worked out a mathematical model which shows that, even with absurd assumptions (7%+ GDP growth for years at a time, low interest rates, etc.), it is simply not feasible for the US government to ‘grow’ its way out.
Default has become the only option. And that could mean a number of things.
They could default on their creditors (other governments like China who loaned money to the US government). But this would spark a global financial and banking crisis.
They could default on the Federal Reserve, which owns trillions of dollars of US debt. But this would create an epic currency crisis for the US dollar.
They could also default on their obligations to their citizens—primarily to future beneficiaries of Social Security (who collectively own trillions of dollars of US debt).
Or they could choose to default on their obligations to every human being alive who holds US dollars… and engineer rampant inflation.
None of these is a good option. And simply put, the US government has reached a point of no return.
I aim to demonstrate this to you in today’s video podcast episode. It’s a very sobering realization.
Visiting New York tells me that all cars are on the way out in big cities. I'm waiting on the Mayor there to start banning privately owned vehicles.
I didn't go into the city (Thank GOD I didn't go in the city, I'd still be looking for the exit.... I was lost on the other side of the Hudson and it wasn't actually that BAD over there. Sheesh!) But, I can tell you anyway, it was pretty crowded and busy even in the area I stayed.
Mal even had trouble with the traffic getting to where I was located.
Odds are your vision includes a home with two kids, as well as two or more cars.
But according to a new study by KPMG, that image is becoming a less common reality. As a growing number of consumers participate in car sharing, wait longer to buy their first vehicle and move to the suburbs, KPMG predicts that in about 25 years, fewer than half of U.S. households will own more than one vehicle.
"We think that the two-car family, over time, it is not going to go down to zero, but a significant amount of people are going to reduce that number," said Gary Silberg, a partner at KPMG who conducted the study.
According to the report, 57 percent of American households currently have two or more cars. Although that percentage has held relatively steady over the last couple of decades, Silberg forecasts it will fall to 43 percent by 2040. That's thanks, in part, to the growing popularity of ride-share companies.
"It is already happening right now. Look at the number of Uber drivers and Lyft drivers," Silberg said. "We think the shared economy is going to be the economy of the future, certainly in automotive."
Another trend the industry's watching is the fact that many people are waiting to buy their first new car. For decades, automakers have counted on hooking buyers when they're young, and keeping them in the corporate family as they age and buy new models.
But in 2012, automotive research firm Polk estimated the average American would buy four fewer new vehicles in their lifetime, compared with a similar study conducted before the recession. Changing demographics and economics have forced families to reconsider how many automobiles they need.
"The average price of a car is around $31,000. The minute you drive it off the lot you lose 11 percent," Silberg said. "Owning a car is not the most rational economic decision."
Of all the trends pushing families away from owning more than one car, urbanization may be the least appreciated.
But as metropolitan areas grow, so does congestion, and that's forcing families to decide it's easier to use companies such as Uber. As a result, the percentage of American households with at least two cars is much smaller for those living in cities such as New York and Chicago.
"This trend is clear," Silberg said. "More people are moving to cities and suburbs where congestion and costs will make them say they don't need two cars."
Silberg said it's possible that the number of vehicles in the U.S. could start trending lower over the next 20 years, as more families decide not to buy a second car. That could have big implications for automakers' top lines.
But Joe Hinrichs, president of the Americas for Ford, said it's too soon to declare the end of the two-car family.
"It is still a big part of America," he said. "It is suburbia, going to work, going to school. It is going to be a big part of the future, as well."
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This is PRECISELY what I predicted a few years back. Obama was trying to make it impossible to dig us out for the next people. See things will be so bad in the future that people will start losing jobs in a big way, it will be impossible to get the debt gone and people will cash in the debt and basically take over land and cities in America. (The Chinese, the Russians... you name it).
They will break off large neighborhoods or even whole cities and set up their own rules and essentially destroy America from within by breaking us into disconnected parts.
Exactly 199 years ago, in 1815, a “temporary” committee was established in the US Senate called the Committee on Finance and Uniform National Currency.
It was set up to address economic issues and the debt accrued by the US government after the War of 1812.
Of course, because there’s nothing more permanent than a temporary government measure, the committee became a permanent one after just one year.
It soon expanded its role from raising tariffs to having influence over taxation, banking, currency, and appropriations.
In subsequent wars, notably the American Civil War, the Committee was quick to use its powers and introduced the union’s first income tax. They also detached the dollar from gold to help fund the war.
This was all an indication of things to come.
Over the subsequent decades there was a sustained push to finally establish the country’s central bank that will control money and credit, as well as institute a permanent income tax to feed the expanding aspirations of government.
They succeeded in 1913 when the Federal Reserve Act was passed and the 16th Amendment ratified, binding the country in the shackles of central banking and taxation of income.
Over the century that followed, the US has gone from being the biggest creditor in the world to its biggest debtor.
Decades of expanding government programs, waste, endless and costly wars, etc. have racked up such an enormous pile of debt that it has become almost impossible to pay it down.
A lot of folks don’t realize that, since the end of World War II, the US government’s total tax revenue has been almost constant at roughly 17% of GDP.
In other words, even though the actual tax rates themselves rise and fall, the government’s ‘slice’ of the economic pie is almost always the same - 17%.
I’ve worked out a mathematical model which shows that, even with absurd assumptions (7%+ GDP growth for years at a time, low interest rates, etc.), it is simply not feasible for the US government to ‘grow’ its way out.
Default has become the only option. And that could mean a number of things.
They could default on their creditors (other governments like China who loaned money to the US government). But this would spark a global financial and banking crisis.
They could default on the Federal Reserve, which owns trillions of dollars of US debt. But this would create an epic currency crisis for the US dollar.
They could also default on their obligations to their citizens—primarily to future beneficiaries of Social Security (who collectively own trillions of dollars of US debt).
Or they could choose to default on their obligations to every human being alive who holds US dollars… and engineer rampant inflation.
None of these is a good option. And simply put, the US government has reached a point of no return.
I aim to demonstrate this to you in today’s video podcast episode. It’s a very sobering realization.
Join me to see it for yourself:
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Treasuries Decline Before Fed’s Decision on Rate-Increase Stance
By Susanne Walker and Anchalee Worrachate December 17, 2014
Treasuries fell before Federal Reserve policy makers wrap up a meeting amid speculation they’ll look beyond Russia’s currency crisis and discuss dropping a pledge to keep interest rates low for a “considerable time.”
U.S. debt pared losses after a report showed the consumer price index declined in November by the most in almost six years, depressed by falling energy prices. Fed Chair Janet Yellen plans to hold a press conference today after the central bank issues its last policy statement for the year.
“We’re expecting the considerable time language to be removed,” said Ian Lyngen, a government-bond strategist at CRT Capital Group LLC in Stamford, Connecticut. “The notion that we’re no longer facing significant inflationary pressure was confirmed by this morning’s CPI data. It will be interesting to see what it’s replaced with, and how the Fed is able to balance between keeping monetary policy extraordinarily accommodative, while moving toward the first rate hike.”
The benchmark 10-year yield rose two basis points, or 0.02 percentage point, to 2.08 percent as of 10:14 a.m. in New York, according to Bloomberg Trader data. The 2.25 percent note due in November 2024 fell 6/32, or $1.88 per $1,000 face amount, to 101 15/32. The yield increased by as much as five basis points. Debt Returns
Treasuries returned 6.7 percent this year as of yesterday, according to the Bloomberg U.S. Treasury Bond Index, after losing 3.4 percent last year.
A measure of volatility rose yesterday to the highest level since October. Bank of America Merrill Lynch’s MOVE Index, which gauges price swings in Treasuries based on options, rose to 80.72. The 2014 average is 61.77.
The volume of Treasuries traded through ICAP Plc, the largest inter-dealer broker of U.S. government debt, yesterday climbed to $425 billion, the most since Dec. 5. The daily average this year is $332.2 billion.
U.S. central bankers may say they’re monitoring markets carefully as Russia’s currency collapse threatens to destabilize other regions, said David Stockton, a former Fed research director who led presentations of economic and financial data for policy makers.
At the same time, they will keep their focus on U.S. economic strength and probably replace the language on timing with something that says they’re going to be patient with rate increases, said Stockton, senior fellow at the Peterson Institute for International Economics in Washington. Fed Policy
Sixty-eight percent of 56 economists surveyed by Bloomberg late last week said the Federal Open Market Committee will drop its pledge to keep interest rates at virtually zero for a “considerable time” and instead adopt a word such as “patient” to describe its approach to policy. Only 23 percent said the committee will keep the pledge.
“It’s most likely that the Fed will refer to geopolitical or external risks, but we still expect the considerable time to be dropped,” said Michael Leister, senior strategist at Commerzbank AG in Frankfurt. “The first rate increase could take place as early as June, and the pressure of rising yields will be more evident at the short end of the market than in longer-dated maturities.”
The Fed is contemplating raising interest rates even as inflation remains below its 2 percent target. The consumer-price index dropped 0.3 percent, the most since December 2008, after being little changed the prior month, a Labor Department report showed. The median forecast of 84 economists surveyed by Bloomberg called for a 0.1 percent fall.
“The number was pretty weak,” said Sean Murphy, a trader at Societe Generale SA in New York, one of the 22 primary dealers that trade with the Fed. “The overriding focus is on the FOMC.” Russia Watch
Russia’s economic crisis won’t stop the Fed from dropping its commitment to keep interest rates low, even as policy makers may acknowledge global risks have intensified.
The ruble has plummeted this week, losing as much as 19 percent yesterday in the biggest one-day drop in 16 years, as panic swept across Russian financial markets after a surprise interest-rate increase overnight failed to stem a run on the currency. The currency increased 1.9 percent today.
The ruble was hammered as the economy heads into recession, hurt by sanctions over the conflict in Ukraine and the tumbling global price of crude oil, Russia’s main export, which plunged below $60 a barrel for the first time in five years.
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The decline of the ruble is the result of Western policy. The question now is how will Putin respond?
The Russian economy was already in the running for having the worst year in 2014, sandwiched somewhere between Congressional Democrats and Sony Entertainment Pictures.
Then the price of oil—the commodity upon which the Russian economy is built—began to fall sharply, draining the nation’s economy of foreign money and crimping its growth. This dynamic drove the ruble sharply lower, culminating in an 11% drop on Monday, which forced Russia’s central bank to raise interest rates by a whopping 650 basis points, all but assuring a deep and painful recession in 2015.
But with strict sanctions in place against Russian companies—in response to Russia’s annexation of Crimea and hostilities with Ukraine earlier this year—and the continuous fall in oil prices, the interest rate hike did not satisfy traders, who sent the the ruble tumbling another 8% following the announcement.
The fall of the ruble has been swift and devastating. Carl Weinberg, chief economist at High Frequency Economics, referred to the currency’s plummet as “an unrecoverable spiral” in a note to clients on Tuesday. He argues that what we are seeing now is a classic “currency collapse,” brought on by both economic factors like sanctions and falling oil prices as well as financial factors like the Russian central bank printing money to help state-owned oil company Rosneft cover its debt denominated in foreign currencies.
What makes the situation in Russia that much worse is that the nation’s companies, both private and state-owned, hold $670 billion in debt denominated in foreign currencies. This debt is about one-third the size of the entire Russian economy, and it will become impossible for Russian companies to service it if the ruble continues to fall. Writes Weinberg:
The amount of rubles local borrowers have to give up to pay off foreign debt obligations just increased by 20 percent overnight, by 50 percent since the start of this month, and by 90% since the start of November…. The effective interest rate on foreign borrowing for Russians is over 6000%, enough to kill any economy.
Normally, when countries find themselves in a situation like Russia’s, they turn to the IMF, which would provide funding and debt restructuring in exchange for the enactment of economic reforms. But as University of Oregon economist Tim Duy writes, it’s tough to see either the IMF swooping in to help an international pariah like Russia or Vladimir Putin submitting to any reforms imposed by the West.
So, how will Russia’s currency crisis affect the U.S.? It’s tough to say for sure. A recession in Russia won’t have much of an effect on the American economy, as the two nations conduct very little trade with each other. But make no mistake, the crisis in Russia today is at least partially a result of the diplomatic policies of the United States. We are seeing the kind of economic misery the U.S. and Europe aimed to inflict on Russia as a result of its aggression in Ukraine.
The question now is whether the economic pain will convince Russia to back down, or double down, in Eastern Europe. Weinberg, for one, worries that Putin will instruct Russian companies to renege on their foreign obligations. This could spell bad news for banks and investors across Europe and the U.S. that have loaned money to Russian companies, and it could allow Russia’s financial instability to infect other emerging markets and the already shaky E.U. economy.
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As the article you posted states as one of the captions, "The decline of the ruble is the result of Western policy. The question now is how will Putin respond?"
See, that's kind of why I asked. "Western Policy"?
I just can NOT see Obama going to the mat to take down the Russian economy, while he's doing shit like welcoming in the Cubans without them changing their government.
The world is seriously skewed.
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Originally Posted by Malsua
Re: Financial Crisis - 2013 - ????
Benjamin Lawsky said last month that it was only a “matter of time” before there was an “Armageddon-style” cyber-attack. Photo: ALAMY
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An employee counts Russian Rouble banknotes at a private company’s office in Krasnoyarsk, Siberia. The rouble opened sharply weaker against both the dollar and the euro on Friday
GDP supposedly grew 5%.
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