Russia raises key interest rate to 17% amid rouble decline

[Asiantravel]

The markets have just received this announcement

“ The USDRUB Pair Will Be Discontinued Due To Recent Instability Of The Russian Ruble"

Edited December 16, 2014 by Asiantravel

[DoNothing]

A year ago many of russians were living in Thailand renting out their apartments in Moscow (2 bedroom ~1.5k+$).
Now thais can living in Russia renting out their apartment in Thailand.

In July I exchanged rubles for 33.7r=1usd.

Today our Central Bank set course to 61.15r=1usd.

But real course is >90r/1usd.

Russia has collapsed.

"Russia is a gas station masquerading as a country" - John McCain

[thailiketoo]

Need some more Pravda stories about how Putin is not afraid of anyone.

[Asiantravel]

What happens if Russia (and China) start dumping US Treasury's on the open market?

[thailiketoo]

What happens if Russia (and China) start dumping US Treasury's on the open market?

If they bought them at 50 and sell them at 100 they would lose half of the money in the Russian Treasury. Did they hire a Thai finance minister?

[F430murci]

In a year the ruble has lost almost 50% against the baht, and likely to lose another 10-20% in the near future. This will make Thailand foods too expensive to import, further limiting Thailand's market strategies as it tries to avoid financial impacts of any potential US and EU markets restrictions over human rights and democratic issues.

Russian oil becomes "cheap" compared to the baht. Good for Thailand? With current and near-future oil prices less than Russia's oil production breakeven costs, it won't be worth Russia's efforts to export oil to Thailand (or anywhere else for that matter). This is another losing situation for Thailand.

Thailand and Russian economic partnership: lose-lose

RUBvsBAHT.jpg

Interesting take.. Oil is now $43 per barrel below Russia's break even point. That means Thailand can pick it up for almost half of the pre-Russian Ruble collapse price from other sources.

The Ruble was being devalued not to make exports attractive, but to try and keep lower oil prices from create large deficiencies in Russia's federal budget. Pretty selfish though process you have here.

US had 15 % inflation, SL crises and etc. in the early 80s. You, however, cannot compare US situation then to Russia now. Completely different economic issues, outlook and potential fixes.

Russia is heading toward isolationist, partly out of necessity, partly out of spite and partly due to sanctions. Participation in world financial markets and inflow of foreign investments helped US in the early 80s, but won't be a savior for Russia now in the direction things are headed.

Drop the US and Russia comparisons that feeds your inner happy button or resentment issues. Stupid selfish crap that completely misses the boat on a dire situation for a lot of lovely, good people.

Sanctions need to stop, the oil price bs needs to stop, Obama needs to become a real man and get over his petty personal issues o Putin showing him up over Snowden, Syria and etc.

Some of you guys don't get it. Russians were already paying double digit mortgage rates even before the central bank started raising rates. You cannot just throw up central bank rates from US in 80s and Russia today and say same, same. 17 % with Russia's economic structure, low GDP person and low income per person is devastating, especially without inflow of foreign investments or participation in the world market.

[thailiketoo]

In a year the ruble has lost almost 50% against the baht, and likely to lose another 10-20% in the near future. This will make Thailand foods too expensive to import, further limiting Thailand's market strategies as it tries to avoid financial impacts of any potential US and EU markets restrictions over human rights and democratic issues.

Russian oil becomes "cheap" compared to the baht. Good for Thailand? With current and near-future oil prices less than Russia's oil production breakeven costs, it won't be worth Russia's efforts to export oil to Thailand (or anywhere else for that matter). This is another losing situation for Thailand.

Thailand and Russian economic partnership: lose-lose

RUBvsBAHT.jpg

Interesting take.. Oil is now $43 per barrel below Russia's break even point. That means Thailand can pick it up for almost half of the pre-Russian Ruble collapse price from other sources.

The Ruble was being devalued not to make exports attractive, but to try and keep lower oil prices from create large deficiencies in Russia's federal budget. Pretty selfish though process you have here.

US had 15 % inflation, SL crises and etc. in the early 80s. You, however, cannot compare US situation then to Russia now. Completely different economic issues, outlook and potential fixes.

Russia is heading toward isolationist, partly out of necessity, partly out of spite and partly due to sanctions. Participation in world financial markets and inflow of foreign investments helped US in the early 80s, but won't be a savior for Russia now in the direction things are headed.

Drop the US and Russia comparisons that feeds your inner happy button or resentment issues. Stupid selfish crap that completely misses the boat on a dire situation for a lot of lovely, good people.

Sanctions need to stop, the oil price bs needs to stop, Obama needs to become a real man and get over his petty personal issues o Putin showing him up over Snowden, Syria and etc.

Some of you guys don't get it. Russians were already paying double digit mortgage rates even before the central bank started raising rates. You cannot just throw up central bank rates from US in 80s and Russia today and say same, same. 17 % with Russia's economic structure, low GDP person and low income per person is devastating, especially without inflow of foreign investments or participation in the world market.

I agree with some of what you said and would add; why not tell the lovely good people to give Crimea back and get all the troops out of the Ukraine.

[Asiantravel]

What happens if Russia (and China) start dumping US Treasury's on the open market?

If they bought them at 50 and sell them at 100 they would lose half of the money in the Russian Treasury. Did they hire a Thai finance minister?

A Russian dump would be material, but not catastrophic. A Chinese dump would be catastrophic. A Russian + Chinese dump would be essentially "game over" for the petrodollar.

[thailiketoo]

What happens if Russia (and China) start dumping US Treasury's on the open market?

If they bought them at 50 and sell them at 100 they would lose half of the money in the Russian Treasury. Did they hire a Thai finance minister?

A Russian dump would be material, but not catastrophic. A Chinese dump would be catastrophic. A Russian + Chinese dump would be essentially "game over" for the petrodollar.

The Chinese thing is 180 degrees off topic so I won't answer that and you know better than to go there. You wrote, "A Russian dump would be material, but not catastrophic." What does that mean? You buy bonds at 100 and sell them at 50. That is a big loss; any normal person would say catastrophic.

[zydeco]

Well, Russians, how do you like the price you're paying for Crimea and Ukraine, now? Russia has just become the world's biggest object lesson. If the US and Western Europe can destroy Russia's economy in less than six months, imagine what they can do to the smaller fish. Small nations need to choose their allies and friends wisely. Choosing Russia is not wise.

[zydeco]

Moral posturing about who is "allowed" to invade and who isn't is irrelevant. What matters, here, is that until a few months ago Russia was swaggering around and acting like it had Europe on a leash. Now, they've been slapped back down to where they really rate in the scheme of things--middle rung. Anybody thinking about tying their fortunes to the Russians has just seen how fragile and disastrous such a decision could be. Net result: Russian economy in ruins and Russian reputation in the mud. Just a Rump Soviet Union.

[balo]

Putin will get drunk tonight . Just keep him away from pressing the red button.

[spidermike007]

<script type='text/javascript'>window.mod_pagespeed_start = Number(new Date());</script>

Russia is not dead, nor will it be. I look forward to about 2 years from now, (an educated guess, but still a guess), for when the ruble will find some legs and become stronger. I think at that time I will be buying rubles and just watch it come back.

The Russians are done buying any condo's in Thailand for a long time, because it simply costs them too much. They can make more getting 17% on their money in a Russian Bank. If they try to sell the condo's they do own here, they will lose about 40% of their value by selling for baht, and then changing the baht into rubles.

I am sure the developers in Thailand are very nervous on how they are going to replace all of those former Russian buyers of their condo's. I would be.

You are probably very correct, on that score. Pattaya, Samui, and Phuket are going to take a real hit from those missing Russian tourists. Last year, they were the second largest tourist group in the country, after the Chinese, from what I am told. At a price hike of nearly double, Thailand is starting to look expensive, even for the Russians. Wonder how many will miss them. Personally, I prefer the Chinese. More jovial, more fun to be around, and friendlier, in comparison.

Preferring the Chinese over the Russians, is that kind of like preferring syphilis over gonorrhea

Not at all. It is preferring jovial over honery. It is preferring life loving over broody, and heavy hearted. It is preferring mild rudeness over extreme rudeness. It is preferring a lamb in the room, instead of a rhinoceros. Nearly everything about most Russian tourists is a turnoff for me. Not so, with the Chinese. The Russians taught me to like the Chinese.

[Publicus]

What happens if Russia (and China) start dumping US Treasury's on the open market?

If they bought them at 50 and sell them at 100 they would lose half of the money in the Russian Treasury. Did they hire a Thai finance minister?

A Russian dump would be material, but not catastrophic. A Chinese dump would be catastrophic. A Russian + Chinese dump would be essentially "game over" for the petrodollar.

When will a Russian "dump" of the USD$ in forex reserves occur....when will a CCP "dump" of the their forex reserves of the USD$ occur......

This wishful thinking continues in its complete disconnect from reality because the answer is never.

The reality is that if Russia "dumped" USD$ forex reserves they would have inflation on the Wiemar scale and the same is true of the CCP Boyz in Beijing. The Bricks only alternative would be to resort to a gold standard which would fail because others would not join...who wants to join an economy acting out of frantic desperation...

The post is more of the fantasy of what theoretically Putin could do but won't ever do. The fact in reality is that neither Putin nor the Boyz in Beijing can do any such thing. It would be financial and economic suicide because in the end the world markets would have to return and resort to the USD$.

Russia is not so much a national economy as it is in fact an oil exporting business, run by oligarchs. The CCP's market socialism with Chinese characteristics is exactly that and it too is on a straight and rapid line to the crapper.

There's no 'when' nor is there an 'if.'

Period.

[roamer]

" I was planning a winter break in Thailand, I'll have to scrap that now."

That was BBC news talking to a Russian shopkeeper, pretty random I would say and an indication of just how much this will affect Russian tourism to Thailand.

[F430murci]

In a year the ruble has lost almost 50% against the baht, and likely to lose another 10-20% in the near future. This will make Thailand foods too expensive to import, further limiting Thailand's market strategies as it tries to avoid financial impacts of any potential US and EU markets restrictions over human rights and democratic issues.

Russian oil becomes "cheap" compared to the baht. Good for Thailand? With current and near-future oil prices less than Russia's oil production breakeven costs, it won't be worth Russia's efforts to export oil to Thailand (or anywhere else for that matter). This is another losing situation for Thailand.

Thailand and Russian economic partnership: lose-lose

RUBvsBAHT.jpg

Interesting take.. Oil is now $43 per barrel below Russia's break even point. That means Thailand can pick it up for almost half of the pre-Russian Ruble collapse price from other sources.

The Ruble was being devalued not to make exports attractive, but to try and keep lower oil prices from create large deficiencies in Russia's federal budget. Pretty selfish though process you have here.

US had 15 % inflation, SL crises and etc. in the early 80s. You, however, cannot compare US situation then to Russia now. Completely different economic issues, outlook and potential fixes.

Russia is heading toward isolationist, partly out of necessity, partly out of spite and partly due to sanctions. Participation in world financial markets and inflow of foreign investments helped US in the early 80s, but won't be a savior for Russia now in the direction things are headed.

Drop the US and Russia comparisons that feeds your inner happy button or resentment issues. Stupid selfish crap that completely misses the boat on a dire situation for a lot of lovely, good people.

Sanctions need to stop, the oil price bs needs to stop, Obama needs to become a real man and get over his petty personal issues o Putin showing him up over Snowden, Syria and etc.

Some of you guys don't get it. Russians were already paying double digit mortgage rates even before the central bank started raising rates. You cannot just throw up central bank rates from US in 80s and Russia today and say same, same. 17 % with Russia's economic structure, low GDP person and low income per person is devastating, especially without inflow of foreign investments or participation in the world market.

I agree with some of what you said and would add; why not tell the lovely good people to give Crimea back and get all the troops out of the Ukraine.

I hear you loud and clear, but it is not the Russians that are suffering causing this. Public opinion in Russia in favor of remaining in the Ukraine/Crimea dropped from 72% approval to 24% approval. This is more a political stand off now than anything else and What both Obama and Putin are doing could hurt both US and Russian citizens long term.

I am very sympathetic to the Ukraine and have many Ukrainian friends. They do not want Russia there, they are very worried and they are suffering big time. They now have black outs between 5 p.m. and 10 p.m. every night.

Obama et al are going about this the wrong way. They will NOT force Putin to do anything. He would cut his own arm off to keep from being shown up by Oabam or told what to do, hence he is considering going back to isolation and telling everyone to f off.

[F430murci]

What happens if Russia (and China) start dumping US Treasury's on the open market?

If they bought them at 50 and sell them at 100 they would lose half of the money in the Russian Treasury. Did they hire a Thai finance minister?

A Russian dump would be material, but not catastrophic. A Chinese dump would be catastrophic. A Russian + Chinese dump would be essentially "game over" for the petrodollar.

You are talking absolute nonsense again, but I assume you already know that. Any sane person would know that. Russia holds about 1.7% of outstanding treasuries. We could easily absorb that and already buying back treasuries at rate to cover in 2 months anyway. China is more dependent upon our treasuries than we are on them. No one would dump anything and drive prices down because they would loose too much and China cannot afford to allow it currency to appreciate and lose exports since they are decades away from becoming a consumption economy.

Dude, I explained tis a while back but you either are too dense to get it or just ignore it to keep spreading rumors and paranoia.

Edited December 16, 2014 by F430murci

[Jingthing]

http://www.slate.com/blogs/moneybox/2014/12/16/russian_currency_crisis_putin_has_no_good_solutions.html

Russia Is So Screwed

Oops!

Maybe the Russians will revolt now against their dictator who is largely to blame for this?

[F430murci]

http://www.slate.com/blogs/moneybox/2014/12/16/russian_currency_crisis_putin_has_no_good_solutions.html

Russia Is So Screwed

Oops!

Maybe the Russians will revolt now against their dictator who is largely to blame for this?

You clearly don't understand Russian mentality or what life is like there. Never happen.

[Jingthing]

http://www.slate.com/blogs/moneybox/2014/12/16/russian_currency_crisis_putin_has_no_good_solutions.html

Russia Is So Screwed

Oops!

Maybe the Russians will revolt now against their dictator who is largely to blame for this?

You clearly don't understand Russian mentality or what life is like there. Never happen.

Was only hoping.

[NeverSure]

17%. That will stop an economy in its tracks. If they pay 17% they have to collect that or more from someone or go tits up.

Who in Russia will borrow money at 17%? Will anyone be dumb enough to lend Russia money at 17%?

Your memory is short -- USA mortgage rates were around that in the 1980's

http://www.bankrate.com/finance/mortgages/history-of-mortgage-interest-rates.aspx

That was done to slow the overheated economy and hyper inflation, and it caused a deep recession that lasted for years.

[F430murci]

http://www.slate.com/blogs/moneybox/2014/12/16/russian_currency_crisis_putin_has_no_good_solutions.html

Russia Is So Screwed

Oops!

Maybe the Russians will revolt now against their dictator who is largely to blame for this?

You clearly don't understand Russian mentality or what life is like there. Never happen.

Was only hoping.

Me too. My wife has been her for 12 or 13 years, is one of the most knowledgeable people in the US about US and Russia global banking and finance issues, but you try and tell her Purin is bad for Russia and her head spins and pea soup like substance comes spewing out of her mouth.

She knows he is wrecking them economically, but she still want to desperately believe he wants or is doing what's right for Russians. She grew up post break up hyper inflation days. She views Putin as raising Russia from the ashes and restoring Russian pride.

[NeverSure]

17%. That will stop an economy in its tracks. If they pay 17% they have to collect that or more from someone or go tits up.

Who in Russia will borrow money at 17%? Will anyone be dumb enough to lend Russia money at 17%?

Just look at 1981, when the President of the U.S. was Jimmy Carter. Mortgage rates hit 18.6%, and people were still buying homes. Sad, but true.

No they weren't buying. The housing market, except for rentals, dried up.

"The early 1980s recession was a severe recession in the United States which began in July 1981 and ended in November 1982. The primary cause was the Federal Reserve's contractionary monetary policy that sought to rein in the high inflation. In the wake of the 1973 oil crisis and the 1979 energy crisis, stagflation began to afflict the U.S. economy."

"The recession had a severe effect on financial institutions such as savings and loans and banks."

"The legislation encouraged a rapid expansion in real estate lending at a time when the real estate market was collapsing, increased the unhealthy competition between banks and savings and loans, and encouraged overbuilding of branches."

LINK

----------------------------------

This is what Russia is asking for by raising interest rates to stop inflation.

One way to describe inflation is to simply say that money loses value. What must Russia's inflation rate look like right now?

[NeverSure]

A Russian dump would be material, but not catastrophic. A Chinese dump would be catastrophic. A Russian + Chinese dump would be essentially "game over" for the petrodollar.

You are talking absolute nonsense again, but I assume you already know that. Any sane person would know that. Russia holds about 1.7% of outstanding treasuries. We could easily absorb that and already buying back treasuries at rate to cover in 2 months anyway. China is more dependent upon our treasuries than we are on them. No one would dump anything and drive prices down because they would loose too much and China cannot afford to allow it currency to appreciate and lose exports since they are decades away from becoming a consumption economy.

Dude, I explained tis a while back but you either are too dense to get it or just ignore it to keep spreading rumors and paranoia.

Russia and China and Thailand and so many others HAVE to hold a significant amount of USD to engage in international trade. They hold them in Treasuries to back their trades because the USD is the petrodollar and the international unit of trade.

If they dumped their Treasuries they would be out of business in international trade. Almost no one will take the currency of China or Russia or Thailand in exchange for what they want to buy.

So many people misunderstand why "The US Owes Them Money" when in fact they are all broke but have to hang on to their Treasuries ($USD) to stay afloat.

Edited December 16, 2014 by NeverSure

[F430murci]

This is really bad news. I dunno, perhaps I am a dumb arrssee, but everyone take a break from the chest thumping. Russia is deep sheet. Despite huge rate increasee, Ruble slid today down to $ 67. This is actually pretty serious.

___________

MOSCOW — Despite the Russian central bank’s extraordinary move to defend the currency, the ruble’s value continued to slide on Tuesday, presenting President Vladimir V. Putin with an acute set of political and economic challenges

. . .

“We are seeing an economic crisis,” Natalia V. Akindinova, a professor at the Higher School of Economics, said in a telephone interview. “We are seeing a sharp devaluation of the ruble at a time when the central bank doesn’t have the reserves to influence the market, as it did in the past crises.”

http://www.nytimes.com/2014/12/17/business/russia-ruble-interest-rates.html?_r=0

Edited December 16, 2014 by F430murci

[wooloomooloo]

My wife has been her for 12 or 13 years, is one of the most knowledgeable people in the US about US and Russia global banking and finance issues, but you try and tell her Purin is bad for Russia and her head spins and pea soup like substance comes spewing out of her mouth.

Glad your wife won't be queueing for three hours for a loaf of bread and running on her bank just to hide her lifesavings under the mattress. Always best to witness the homeland implode from a distance.

Strangely enough, the current sanctions are relatively mild and the screw yet to be turned but the Russian economy is a wreck already.

Don't be fooled - the masses will turn on Putin when they're starving.

[Schmackos]

Dose Putin care at all if the Rouble will lose 50% of it's value? of course not, he's got

his loot all in foreign currencies, he's not stupid to keep it in Roubles...

I believe that with Putin it's more about his ego, his popularity, then his wealth.

He's very popular back in Russia.

This is an interesting read http://www.telegraph.co.uk/news/worldnews/vladimir-putin/11257362/Seven-reasons-to-explain-Vladimir-Putins-popularity-cult.html

[F430murci]

My wife has been her for 12 or 13 years, is one of the most knowledgeable people in the US about US and Russia global banking and finance issues, but you try and tell her Purin is bad for Russia and her head spins and pea soup like substance comes spewing out of her mouth.

Glad your wife won't be queueing for three hours for a loaf of bread and running on her bank just to hide her lifesavings under the mattress. Always best to witness the homeland implode from a distance.

Strangely enough, the current sanctions are relatively mild and the screw yet to be turned but the Russian economy is a wreck already.

Don't be fooled - the masses will turn on Putin when they're starving.

It ain't sanctions. Its oil price which is driven by US and Saudi.

[neverdie]

In the coming days little Vladimir will appear shirtless on horseback brandishing a cross bow and Bowie knife, cheaply made Russian versions of the said items perhaps. He will beat his freshly shaven chest before continuing to ride around & around In circles.

........Meanwhile, back in the real world, innocent Russians continue to suffer.

What a leader. What a sick individual.

[Jingthing]

My wife has been her for 12 or 13 years, is one of the most knowledgeable people in the US about US and Russia global banking and finance issues, but you try and tell her Purin is bad for Russia and her head spins and pea soup like substance comes spewing out of her mouth.

Glad your wife won't be queueing for three hours for a loaf of bread and running on her bank just to hide her lifesavings under the mattress. Always best to witness the homeland implode from a distance.

Strangely enough, the current sanctions are relatively mild and the screw yet to be turned but the Russian economy is a wreck already.

Don't be fooled - the masses will turn on Putin when they're starving.

It ain't sanctions. Its oil price which is driven by US and Saudi.

It's Putin.

http://www.timesofisrael.com/russia-grapples-with-shock-ruble-fall/

Some observers said the reasons behind the vertiginous fall in the ruble could not be explained by economic factors alone.

“The ruble’s worth reflects the worth of Putin’s rule in the eyes of the market,” said political observer Yulia Latynina.

“You can fool a voter but you cannot fool the markets.”

Putin, who has repeatedly dismissed economic trouble as temporary, remained conspicuously silent on Tuesday as Russians rushed to convert their savings, even leading some bank webpages to crash.