re: Update pg 23: Russia,IMO, will default on its sovereign debt within six months

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Still chugging along (to some degree).

EOG = Enron Oil and Gas

ETA:

1999
EOG Resources, Inc. (EOG), formerly Enron Oil & Gas Company, adopted a new name and declared its independence from Enron Corp.

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As you say, not part of ENRON

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Enron Oil and Gas became independent from Enron in 1999

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ENRON was bankrupt 2yrs after the split

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A key move Russia could and should make to aid in stopping the ruble's free fall is to work with the Ukrainian government to end the conflict there, so that the U.S. and Europe would lift sanctions.

If Russia doesn't come to the table – and soon – then we will likely see a repeat of the 1998 collapse of Russia's economy. This time, it would be worse.

Russia's 1998 default hit investors hard, and that memory is still fresh, so it will be far more difficult this time for Russia to entice foreign capital – no matter where the interest rate is set.

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LINK-CNBC, 12/17/14

I had not seen that. Thanks.

The Russians are too stubborn to go to the table until it is too late.

Swiss charging fro Swiss Francs......

NEGATIVE interest = -0.25%

Negative Interest for Swiss Francs

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Swiss charging fro Swiss Francs......

NEGATIVE interest = -0.25%

Negative Interest for Swiss Francs

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Sweden tried that a few years ago with their krona and it didn't have the results they wanted. It sort of backfired on them from unintended consequences.

Regarding your first post about a stronger dollar causing bad times for U.S. multinationals, that is the common belief. However it would take a real dollar surge, as in double-digit percentage increases in the dollar, before it would be noticeable.

And the Russian ruble could drop to zero and probably only McDonalds, Apple and Coco-Cola would see even a slight impact. Along those lines, Apple just announced yesterday (or the day before) a 25% price increase in their products sold in Russia.

And Putin's biggest ally, Belarus President Lukashenko, announced today his country would no long accept Russian rubles for their exports to Russia. Euros and U.S. dollars only, please...

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What's Putin's next move? How does he shore up his crumbling economy?

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He revealed his strategy earlier today (Moscow time) in a three-hour speech/press conference. (link is below)

His strategy is, as it always has been for Russia for several centuries whenever something bad happens to their country, is to blame everything on the foreigners. In this case, it's all Europe's and the United States' fault because they (we) don't want Russia to have its rightful place as a super power.

LINK

Here is a short excerpt:

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In keeping with the themes of his presidency, Mr. Putin blamed the West for many of the problems, saying it has historically conspired to to tear down Russia every time it seems to gain strength.

On this occasion, he found a new, vivid image, saying that the West was trying to restrain the Russian bear by using NATO to come up to the very borders of Russia. The West wants the bear to sit around eating honey and berries, not chasing around the forest after piglets, Mr. Putin said, suggesting that its adversaries wanted to turn it into a stuffed animal.

“They won’t leave it alone, because they will always seek to chain it,” he said. “Once they manage to chain it, they will rip out the teeth and claws.”

The teeth and claws in this case are nuclear deterrence, he said.

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I personally believe his next diversion will be to start some trouble either in the Baltics or in the Balkans.

The Russian Duma (parliament) passed a bank recapitalization bill today....in one day which is almost unheard of.

One member of the Duma says anyone who voted against the bill wants Russia to have another 1917-type revolution.

It calls for injecting 1,000,000,000,000 rubles (one trillion) into the country's "systemic" banks.

LINK

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A bill authorizing a 1-trillion ruble recapitalization of banks was rushed through Russia’s lower house of parliament.

Legislators in the State Duma approved the bill in all three readings today, allowing the Finance Ministry to issue new OFZ bonds that will be exchanged for subordinated bonds of recapitalized banks.

“Those who are against are Bolsheviks,” Andrei Makarov, chairman of the Duma’s committee on budget issues and taxes, told deputies. “You are calling for 1917.”

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Sort of, but not exactly.

TARP was designed for the government to buy mortgage-backed securities that banks owned that were under water.

It morphed into the Feds loaning banks money that could be counted as Tier 2 capital and which has been almost all repaid now.

And all U.S. banks were eligible for TARP money, not just the big banks.

It means the Russian parliament acknowledges Russia's biggest banks are bankrupt, meaning they have no capital, because their liabilities (what they owe) exceeds their assets (what they own).

It's a stop gap measure to make it look like their banks are not going to fail. The purpose is to try and reassure depositors to not pull their money out of Russian banks.

IOW, it's an attempt to prevent what is commonly known as "runs" on the bank. (See the movie "It's a Wonderful Life" when all the depositors show up at the Bailey Building and Loan to withdraw their deposits. )

But in the case of Russia, it's the large corporate depositors and other banks who are afraid their money deposited in Russia's biggest banks might be lost forever if the big banks fail.

As a sign of how desperate some banks are to get cash, one bank today paid over 38% interest to borrow from the Russian Treasury Department just to get cash for 10 days. (In a sign of the magnitude of the cash shortage, one bank paid 38.3 percent today to take the entire 150 billion rubles ($2.5 billion) of 10-day deposits auctioned by the Treasury. )

In one of my earlier posts from a month of so ago, I predicted this would happen.