Russian invasion of Ukraine

Just wonder what their currency trend really means today. By that I mean many years ago when trying to trade with the newer Russia everything was using the US dollar as the basis to do any business (even their version of the mafia). The rouble was simply ignored as a serious currency.

I am decades out of date but am interested to know what if any real significance we can attach to the demise of the rouble.
 
AS LONG AS WE KEEP SANCTIONS AND DON’T GIVE IN

Imagine a vast but shallow lake. It’s sitting in the heat of runaway climate change, it’s water evaporating faster than the rivers that feed it can replace the water. That is today’s Russian economy.

DECEPTION AND INFLATION

The Russian people are being played. They have been played before, during the 1990’s. Back then the newly privatised corporations run by super wealthy oligarchs, used and abused the inflation of the times and their supposed economic hardships, to extract maximum cash from the situation.

Russian businesses often declared themselves unable to pay their workers – for as long as six months at a time. Inflation reached a peak – a staggering 2,333.30% in December 1992. Yet, despite it all, interest rates were minus 15%. You see the oligarchs realized they could easily get the money to pay their workers, but if they held off paying them across a period of six months, the banks they controlled would loan money to these workers who would borrow at high interest rates (even though the official rate was minus). Also by the time their fixed amount of pay was actually paid to them six months later it was worth vastly less and would cost the company less money because of inflation. Then the money they had been paid would have to be paid back to cover the debts they’d gained from not being paid. And the cycle would start again.

In many ways the Putin regime is doing a similar thing now. State debts to business, to workers, salaries to soldiers, recruitment bonuses and especially death compensation, are all being left six to twelve months for payout. This kicks billions in costs down the road, inflation erodes the real value of the amount that has to be paid, which doesn’t change.


2014 – PUTIN LEARNS A LESSON

For now we can already see that the West’s collective failure – for which Angela Merckl and Barak Obama are the leading causes – to teach Russia a lesson, with sanctions after the occupation of Crimea and the acceleration of conflict in the Donbas, taught Putin important lessons.

The west doesn’t really care about Ukraine but feels it has to do something
That at best the few sanctions that there were, would have little effect and not last very long.
When the planning for the re-absorbtion of Ukraine began, mostly around 2017-18, Putin knew he would need to have a huge cash reserve, because he’d need to get through at least two tough years of sanctions before the West would start to let things go back to normal. So he set about creating a Sovereign Wealth Fund. Quite literally a savings pot on a massive scale. Over $600 billion in cash was stashed away with another $400 billion in gold, which turned out to be less helpful than imagined, because it couldn’t be sold.

The $600 billion was held in two primary pots – around $400 billion in overseas banks and deposits, split up in various currencies, mostly in Europe and N.America. It was this money that was most active, baking up trades and purchases and supporting exports. The other $200 billion was held in Russia in foreign currency reserves and roubles.


PREPARING FOR WAR

Putin faced a dilemma. As the military build up progressed during 2021 and into early 2022, he was being publicly called out for preparing an invasion by the US administration. At this point he should have been withdrawing deposits around Europe and America and puling them back to Russia, but if he did that the alarm bells would really sound and his denials that an invasion was imminent would be even more hollow than they were to anyone willing to listen. It was the lack of financial movement that made so many wary of American claims.

When the attack came on February 24 2022, the Russians tried to liquidate their oversees holdings and managed to snatch back around $100 billion before they were stopped, leaving $300 billion frozen in the West, now being used to support Ukrainian weapons purchases and financing its military based on the interest the money generates. Nobody was prepared to confiscate the money because they feared the harm it would do to western banking’s reputation with other sovereign governments.

Putin was OK with this in the end, because the invasion caused a massive spike in gas and oil prices, – and it was almost another year before Europe was able to cut itself off almost completely from Russian gas and oil. For the first year Europe was sending arms to Ukraine with one hand and paying the Kremlin to invade with the other.


NOTHING GOES WRONG LIKE A PLAN

However, when the cutoff came it was rude awakening, there were two reasons for this.

Firstly the war had already gone horribly wrong. The three to seven day campaign to reabsorb Ukraine had, by September 2022, turned into a hideous rout in the north and the pain of Kherson. Indeed the US was so concerned that Russia was on the cusp of using a tactical nuclear weapon to halt its misfortunes, clear warnings were issued as to how this would be dealt with.

Secondly, the Europeans had and were continuing to, cut their reliance on Russia energy in a way that Putin simply didn’t think they had in them. He honestly believed they would never manage it, they were so dependent they would have to give in. That had been the whole secondary reason for the gas and oil strategies in the first place – Europe was an energy junkie and it was hooked on the only supplier available. Where could they go for energy that cheap? For the first time he faced Europe with a backbone. Add to that Finland and Sweden asking to join NATO and much of his western strategy had failed miserably. Ironically Putin, always seen as the master genius of the situation had not been paying attention to the vast expansion in US energy production, betrayed his allies in Saudi Arabia over oil pricing and production, and thought none of it mattered.

Then came the sanctions, the obvious ones, then, more and more western companies abandoned Russia, as time went on the international banking system became inaccessible to Russian banks. the currency started to devalue, but prideful Putin wasted billions of Euros from his cash reserves buying roubles to prop up the value. That would never last and came to an end.


WAR RAGES ON AS STATE INCOME DROPS

We know that Russia is suffering from real inflation and acknowledged inflation. The interest rate is 21% and likely to rise, taxation is through the roof. But so is pay if you’re working, or in the military. Parts of Russia that had their men taken for mobilization – almost anywhere except Moscow and St.Petersburg, have seen unprecedented mini-booms in income and purchasing power form high salaries and some $60 billion in death benefits that have been paid out since the war began, $34 billion just in this year, let alone military salaries and recruitment bonuses. When all this money arrives in places that don’t see that much in ten years of work, it creates a feel good factor and a false sense of affordability. You can pay your way, at least for now. Unless you’re a pensioner on a fixed income, or a sate civil servant. There is a thin veneer of everything being OK for many, while those who really are the poorest – pensioners, see and feel the pain every day.

Yet the Russian Federation is not earning the money to pay for the war on anything like the scale it needs to be. Revnues from oil and gas are well down, by some 65%. The military and security budgets are consuming some 55% of state finances. There’s only one way this is being paid for: the government is ‘printing’ money. That’s why real inflation is soaring, salaries are being paid and companies are building weapons.

How do we know this is true? Because the bond market is dead. The state isn’t borrowing the money because it has nobody to lend to it. The currency is devaluing at around 5% per month, inflation is super-high and most importantly interest rates are 21%. All this tells you that the economy is overheating, there’s too much cash in the system that has no value, and it can’t be spent fast enough on things people want because inflation is eating away at the value of what they have.

OBSCURING REALITY

Most Russian have no idea what’s happening. The RT news channel has already admitted its journalists are now AI generated characters with their own social media accounts to make them more convincing. That way they deliver only pre-programmed news and there’s no risk of a journalist with a conscience making a protest. Russians are on a paper thin filament that’s separating them from their feel good moment of what appears to high GDP and good pay, and a pit of economic collapse and depth that will make the 1990’s seem like a picnic.

Russia’s Ministry of Finance and the bank governor Elvira Nabulina, are running one of the most dangerous scams in Russian financial history. Economics mean you have to have more coming in than you have going out at some stage. It’s that simple. Russia has had less coming in for months, manipulations and economic smoke and mirrors, are keeping it going, with what’s left of the national wealth fund subsidizing that fake reality.

The sanctions have finally reached peak and they are having the desired effect. Russia is under huge pressure. The lake is drying out and it cannot go on much longer, a year or so perhaps. then the bare salt flats of reality will be exposed for all to see.

Even if there is peace, it will take a miracle for the massive jolt Russia will face as these salaries stop getting paid for an army it doesn’t need, its factories face mass layoffs, as it no longer needs the weapons and has no way of just converting back to normal production. What will it do with half a million armed men without a job facing endless poverty after all their sacrifices? Take a look at Germany in 1919-20 as it teetered on the brink of chaos and civil war, or Russia in 1917-22, as it faced civil war and revolution. None of it ends especially well for the current leadership.

THE WAR FOR PUTIN MUST BE WON

Putin has to win this war to survive. Ukrainian people and taxes, its raw materials and resources are vital for Russia to recover. It has to be a win, and soon, or Putins ability to fund his war and continue pulling wool over everyone’s eyes as to the realities, are going to be exposed.

That’s why he will do everything to win as much as he can before it’s no longer possible. The fighting will be relentless because Putin only has one chance now. Every day nearer January 20th means a lost day to win. He knows the geopolitical weather is about to change – but he doesn’t yet know how. The mixed messaging is impossible to read from the new Trump guard. It could go all his way. Ukraine will still fight though. It could be that he’s faced with an intransigent Trump who doesn’t want to be seen as weak.

The ticking time bomb of economic doom is counting down. No matter what happens.

There’s an old adage, “A war economy doesn’t usually collapse. Until it does.”

The Analyst

Slava Ukraine!
 
Scottyboi said:
AS LONG AS WE KEEP SANCTIONS AND DON’T GIVE IN

Imagine a vast but shallow lake. It’s sitting in the heat of runaway climate change, it’s water evaporating faster than the rivers that feed it can replace the water. That is today’s Russian economy.

DECEPTION AND INFLATION

The Russian people are being played. They have been played before, during the 1990’s. Back then the newly privatised corporations run by super wealthy oligarchs, used and abused the inflation of the times and their supposed economic hardships, to extract maximum cash from the situation.

Russian businesses often declared themselves unable to pay their workers – for as long as six months at a time. Inflation reached a peak – a staggering 2,333.30% in December 1992. Yet, despite it all, interest rates were minus 15%. You see the oligarchs realized they could easily get the money to pay their workers, but if they held off paying them across a period of six months, the banks they controlled would loan money to these workers who would borrow at high interest rates (even though the official rate was minus). Also by the time their fixed amount of pay was actually paid to them six months later it was worth vastly less and would cost the company less money because of inflation. Then the money they had been paid would have to be paid back to cover the debts they’d gained from not being paid. And the cycle would start again.

In many ways the Putin regime is doing a similar thing now. State debts to business, to workers, salaries to soldiers, recruitment bonuses and especially death compensation, are all being left six to twelve months for payout. This kicks billions in costs down the road, inflation erodes the real value of the amount that has to be paid, which doesn’t change.


2014 – PUTIN LEARNS A LESSON

For now we can already see that the West’s collective failure – for which Angela Merckl and Barak Obama are the leading causes – to teach Russia a lesson, with sanctions after the occupation of Crimea and the acceleration of conflict in the Donbas, taught Putin important lessons.

The west doesn’t really care about Ukraine but feels it has to do something
That at best the few sanctions that there were, would have little effect and not last very long.
When the planning for the re-absorbtion of Ukraine began, mostly around 2017-18, Putin knew he would need to have a huge cash reserve, because he’d need to get through at least two tough years of sanctions before the West would start to let things go back to normal. So he set about creating a Sovereign Wealth Fund. Quite literally a savings pot on a massive scale. Over $600 billion in cash was stashed away with another $400 billion in gold, which turned out to be less helpful than imagined, because it couldn’t be sold.

The $600 billion was held in two primary pots – around $400 billion in overseas banks and deposits, split up in various currencies, mostly in Europe and N.America. It was this money that was most active, baking up trades and purchases and supporting exports. The other $200 billion was held in Russia in foreign currency reserves and roubles.


PREPARING FOR WAR

Putin faced a dilemma. As the military build up progressed during 2021 and into early 2022, he was being publicly called out for preparing an invasion by the US administration. At this point he should have been withdrawing deposits around Europe and America and puling them back to Russia, but if he did that the alarm bells would really sound and his denials that an invasion was imminent would be even more hollow than they were to anyone willing to listen. It was the lack of financial movement that made so many wary of American claims.

When the attack came on February 24 2022, the Russians tried to liquidate their oversees holdings and managed to snatch back around $100 billion before they were stopped, leaving $300 billion frozen in the West, now being used to support Ukrainian weapons purchases and financing its military based on the interest the money generates. Nobody was prepared to confiscate the money because they feared the harm it would do to western banking’s reputation with other sovereign governments.

Putin was OK with this in the end, because the invasion caused a massive spike in gas and oil prices, – and it was almost another year before Europe was able to cut itself off almost completely from Russian gas and oil. For the first year Europe was sending arms to Ukraine with one hand and paying the Kremlin to invade with the other.


NOTHING GOES WRONG LIKE A PLAN

However, when the cutoff came it was rude awakening, there were two reasons for this.

Firstly the war had already gone horribly wrong. The three to seven day campaign to reabsorb Ukraine had, by September 2022, turned into a hideous rout in the north and the pain of Kherson. Indeed the US was so concerned that Russia was on the cusp of using a tactical nuclear weapon to halt its misfortunes, clear warnings were issued as to how this would be dealt with.

Secondly, the Europeans had and were continuing to, cut their reliance on Russia energy in a way that Putin simply didn’t think they had in them. He honestly believed they would never manage it, they were so dependent they would have to give in. That had been the whole secondary reason for the gas and oil strategies in the first place – Europe was an energy junkie and it was hooked on the only supplier available. Where could they go for energy that cheap? For the first time he faced Europe with a backbone. Add to that Finland and Sweden asking to join NATO and much of his western strategy had failed miserably. Ironically Putin, always seen as the master genius of the situation had not been paying attention to the vast expansion in US energy production, betrayed his allies in Saudi Arabia over oil pricing and production, and thought none of it mattered.

Then came the sanctions, the obvious ones, then, more and more western companies abandoned Russia, as time went on the international banking system became inaccessible to Russian banks. the currency started to devalue, but prideful Putin wasted billions of Euros from his cash reserves buying roubles to prop up the value. That would never last and came to an end.


WAR RAGES ON AS STATE INCOME DROPS

We know that Russia is suffering from real inflation and acknowledged inflation. The interest rate is 21% and likely to rise, taxation is through the roof. But so is pay if you’re working, or in the military. Parts of Russia that had their men taken for mobilization – almost anywhere except Moscow and St.Petersburg, have seen unprecedented mini-booms in income and purchasing power form high salaries and some $60 billion in death benefits that have been paid out since the war began, $34 billion just in this year, let alone military salaries and recruitment bonuses. When all this money arrives in places that don’t see that much in ten years of work, it creates a feel good factor and a false sense of affordability. You can pay your way, at least for now. Unless you’re a pensioner on a fixed income, or a sate civil servant. There is a thin veneer of everything being OK for many, while those who really are the poorest – pensioners, see and feel the pain every day.

Yet the Russian Federation is not earning the money to pay for the war on anything like the scale it needs to be. Revnues from oil and gas are well down, by some 65%. The military and security budgets are consuming some 55% of state finances. There’s only one way this is being paid for: the government is ‘printing’ money. That’s why real inflation is soaring, salaries are being paid and companies are building weapons.

How do we know this is true? Because the bond market is dead. The state isn’t borrowing the money because it has nobody to lend to it. The currency is devaluing at around 5% per month, inflation is super-high and most importantly interest rates are 21%. All this tells you that the economy is overheating, there’s too much cash in the system that has no value, and it can’t be spent fast enough on things people want because inflation is eating away at the value of what they have.

OBSCURING REALITY

Most Russian have no idea what’s happening. The RT news channel has already admitted its journalists are now AI generated characters with their own social media accounts to make them more convincing. That way they deliver only pre-programmed news and there’s no risk of a journalist with a conscience making a protest. Russians are on a paper thin filament that’s separating them from their feel good moment of what appears to high GDP and good pay, and a pit of economic collapse and depth that will make the 1990’s seem like a picnic.

Russia’s Ministry of Finance and the bank governor Elvira Nabulina, are running one of the most dangerous scams in Russian financial history. Economics mean you have to have more coming in than you have going out at some stage. It’s that simple. Russia has had less coming in for months, manipulations and economic smoke and mirrors, are keeping it going, with what’s left of the national wealth fund subsidizing that fake reality.

The sanctions have finally reached peak and they are having the desired effect. Russia is under huge pressure. The lake is drying out and it cannot go on much longer, a year or so perhaps. then the bare salt flats of reality will be exposed for all to see.

Even if there is peace, it will take a miracle for the massive jolt Russia will face as these salaries stop getting paid for an army it doesn’t need, its factories face mass layoffs, as it no longer needs the weapons and has no way of just converting back to normal production. What will it do with half a million armed men without a job facing endless poverty after all their sacrifices? Take a look at Germany in 1919-20 as it teetered on the brink of chaos and civil war, or Russia in 1917-22, as it faced civil war and revolution. None of it ends especially well for the current leadership.

THE WAR FOR PUTIN MUST BE WON

Putin has to win this war to survive. Ukrainian people and taxes, its raw materials and resources are vital for Russia to recover. It has to be a win, and soon, or Putins ability to fund his war and continue pulling wool over everyone’s eyes as to the realities, are going to be exposed.

That’s why he will do everything to win as much as he can before it’s no longer possible. The fighting will be relentless because Putin only has one chance now. Every day nearer January 20th means a lost day to win. He knows the geopolitical weather is about to change – but he doesn’t yet know how. The mixed messaging is impossible to read from the new Trump guard. It could go all his way. Ukraine will still fight though. It could be that he’s faced with an intransigent Trump who doesn’t want to be seen as weak.

The ticking time bomb of economic doom is counting down. No matter what happens.

There’s an old adage, “A war economy doesn’t usually collapse. Until it does.”

The Analyst

Slava Ukraine!
Click to expand...
Interesting read that and underlines my view that irrespective of how this plays out militarily, we must maintain the sanctions to the maximum extent.
 
gordondaviesmoustache said:
Interesting read that and underlines my view that irrespective of how this plays out militarily, we must maintain the sanctions to the maximum extent.
Click to expand...

Yep the bit around half a million soldiers potentially going unpaid or having zero job prospects for their 'sacrifice' will be a huge problem in itself. The russian general population are being robbed blind. The women who is in charge of the central bank wanted to leave at the start of the war and was made to stay, she will be the fall guy for the economy.
 
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