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Russia warns could 'reduce to zero' economic dependency on US
Russia could reduce to zero its economic dependency on the United States if Washington agreed sanctions against Moscow over Ukraine, a Kremlin aide said on Tuesday, warning that the American financial system faced a "crash" if this happened.
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"We would find a way not just to reduce our dependency on the United States to zero but to emerge from those sanctions with great benefits for ourselves," said Kremlin economic aide Sergei Glazyev.
He told the RIA Novosti news agency Russia could stop using dollars for international transactions and create its own payment system using its "wonderful trade and economic relations with our partners in the East and South."
Russian firms and banks would also not return loans from American financial institutions, he said.
"An attempt to announce sanctions would end in a crash for the financial system of the United States, which would cause the end of the domination of the United States in the global financial system," he added.
So Russia is going to abandon the dollar as a reserve currency? Good luck with that one – Telegraph Blogs
I've written before about the inevitability of decline for the dollar as the world's major reserve currency, but this process is on a very long fuse and basically depends on China eventually displacing the US as the world's largest economy.
That's not going to happen any time soon. In the meantime, the dollar remains overwhelmingly the currency of choice for international transactions, and is the middle currency in virtually all transactions. For instance, if you were looking to buy Singapore dollars with Russian roubles, you would typically first buy US dollars with your roubles and then swap them into Singapore dollars. The US dollar is also the pricing currency for virtually all commodity transactions, including crucially, oil. Repeated attempts to set up alternative pricing arrangements have all come to nothing.
Then finally, more than 60 per cent of the world's central bank foreign currency reserves are held in dollars. The euro, the next biggest reserve currency, comes nowhere close. This is not about to change. In other words, Russian threats are as vacuous as Western ones. Hey ho.
Any major player in the global economy can cause issues for others but, there are a finite number of producers and consumers at any one time
Is this a bunch of threatening rhetoric, with no legs?
According to the below article, it's highly improbable.
Especially since any sanctions would not come from a group of nations but unilaterally from the US.
Russia has $200 billion in US bonds and could dump them to drop US Dollar value.
Back in June of 2013 China and Japan between them dumped about $40 billion in Treasuries.
By November we were up to about $120 billion in net outflows, the biggest Exodus from U.S. bonds since 1977.
During that period the DYX feel by ~3%.
Did you notice?
I didn't.
My wife and I bought two new cars, she got a new job, I got a raise, nothing but good economic stuff happened.
Now, explain to me why Russia dumping $200 million worth of bonds matters?
Back in June of 2013 China and Japan between them dumped about $40 billion in Treasuries.
By November we were up to about $120 billion in net outflows, the biggest Exodus from U.S. bonds since 1977.
During that period the DYX feel by ~3%.
Did you notice?
I didn't.
My wife and I bought two new cars, she got a new job, I got a raise, nothing but good economic stuff happened.
Now, explain to me why Russia dumping $200 million worth of bonds matters?
That would be $200 BILLION of US bonds.
Russia is the World's second largest producer of oil. Pricing maybe 6,000,000 barrels per day in Rubles instead of dollars would also have an impact. I wouldn't hold my hand over my ass waiting for another new car if they do that.
Then why haven't they done so already?
Right, roughly equivalent to the recent sell-off, a little less but still in the same church.
We're not talking about numbers large enough to have a significant effect the economy.
It'll have an effect, sure, but it's not a game-changer by any means.
Keep in mind that "dumping" bonds just means that you sell them to someone else.
The U.S. would itself pick up a lot of that slack (the FED would force banks to buy them) but you also need to bear in mind that the $ is far and away the largest component of global currency reserves (roughly 65%).
That means that a LOT of places other than the U.S. have a very vested interest in ensuring that the bottom does not drop out of the $.
You really think $200 billion in U.S. Securities are going to have THAT hard of a time finding a new home?
I don't.
Again, a bunch of Chicken Little nonsense by the media to skeer folks into tuning in.
Assumes that everyone is going to get on board with Russia's plan and agree to trade with Russia in RUB.
Who are Russia's biggest oil buyers?
Germany, Netherlands, the U.S., China (who already trades with Russia in RUB).
Well, we're certainly not going to agree to the new plan.
Germany and the rest of the EU?
Maybe.
They need Russia's oil, sure.
But economically Russia is largely a one trick pony.
The U.S. and EU CAN get oil elsewhere.
If the U.S. and EU stop buying Russian oil they'd be pretty hard pressed to sell it to anyone else and wouldn't have the infrastructure to do so even if they wanted to.
They'd effectively cripple themselves.
See, just because Russia threatens that it's going to do something (that will necessarily hurt them infinitely more than it'll hurt us if things go south on them) doesn't mean it's a credible threat.
But, again, they're scare mongering too because they know that most Americans aren't even financially savvy enough to live month-to-month on their minimum wage paycheck successfully, never-mind having the ability to parse threats to global finance.
Make a threat, make a claim, and next thing you know 500,000 Americans who have no idea WTF is happening are standing on the National Mall like Pavlov's dogs threatening (yapping) to vote their incumbent representatives out of office unless those people fix this mess, stat!!!!
I still think that with the EU/US economies suffering as they are, we don't need to be adding any additional trouble, just because we don't like what Putin did in the Ukraine.
Let's just roll over and let Russia do whatever they want. Can't see the harm in that...
Ok, well it appears your not in favour of punishing him economically, so what do you favour, a military response? I just don't think what Putins done is a big deal at all.
Seems to me we've plenty of resources on our own, if we'd just get off our political dairy-aires to exploit them properly. Let's go out and build our oil and natural gas resources as we ought, putting what, some estimated 50,000 people to work in the process, and drive down the price of oil and natural gas - prices Russia NEEDS to be as high as possible to fund their government - and let's bring them to their knees economically (again), while kick-starting our economy, making us independent on foreign oil and put a stop to this nonsense.
I get it. But if WE took advantage of our plentiful and abundant resources, like oil and natural gas, WE could sell them to the Europeans and then they'd be less dependent on Russia for them - which would force the Russians to drop their prices - who, btw NEED Europe to be buying their oil as much as Europe needs Russia at the moment to supply it.WE are fine, WE don't need Russia at all, the EUROPEANS are not. THEY need Russia. Get it?
I get it. But if WE took advantage of our plentiful and abundant resources, like oil and natural gas, WE could sell them to the Europeans and then they'd be less dependent on Russia for them - which would force the Russians to drop their prices - who, btw NEED Europe to be buying their oil as much as Europe needs Russia at the moment to supply it.
I get it. But if WE took advantage of our plentiful and abundant resources, like oil and natural gas, WE could sell them to the Europeans and then they'd be less dependent on Russia for them - which would force the Russians to drop their prices - who, btw NEED Europe to be buying their oil as much as Europe needs Russia at the moment to supply it.
No argument there. It's something we should've (could've) been working on for years now - and would've were it not for the yahoo in the WH now.Yes, and that's in the works, but delivering oil and gas takes serious infrastructure. Long story short, it will be a couple years before we can sell gas to the Europeans. Russia can cut off their pipelines tomorrow. What's Europe gonna do in the meantime?
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