I read that article, when you posted the link. My impression was that globalresearch.ca has some wingnut content, and that that article is probably an example of same.
I don't pretend to understand all that international finance stuff, it confuses the heck out of me. I guess that in part because it is so mysterious, it is a favorite topic of wingnuts: there's got to be thousands of web pages about how the dollar is going to be worthless any day now, the gold standard, freemasonry, blah blah blah. I am confident that none of those authors understand the subject any better than I do. Like Jehovah's Witnesses, their faith is unshaken even though the world somehow persisted, after their repeated predictions of its end date.
But by coincidence, just after you posted that link, there was a much more thoughtful, well-reasoned and factually based article about the future of the dollar in NY Times.
That article specifically mentioned the use of the dollar as the standard of payments for petroleum, and said that other currencies have gradually been displacing the dollar in that role for some time, a trend that can be expected to continue. The author didn't suggest that that was particularly bad or good news for the dollar.
The main message was, world conditions are changing quite a lot (as we all know), but even so the dollar remains enormously popular. In particular, it is the preferred reserve currency, and the author explains why this is so, and why the dollar will remain an important reserve currency for years to come. The article concludes by saying that other currencies will rise in importance as reserve currencies -- but the dollar will continue to be one of them.
As rb pointed out at the start, Russia's economy is dwarfed by the economic might of the West. Ironically, if Russia had seriously adopted Western-style reforms in 2000 instead of hitching its wagon to one of the greatest thieves in all history, Russia probably would be a great economic power today! But it isn't.
For that reason, I'm skeptical that Putin has the leverage to make any major financial waves. Even worse for him, Russia is strongly dependent on the dollar as a reserve currency -- Putin has been spending billions of his dollar reserves (Russia has very large dollar holdings) buying rubles in order to prop up HIS plummeting currrency. So it seems to me, that killing the dollar would harm Russia quite severely.
Finally, if the dollar does weaken in the next year or two, that could be good news for the USA. It would make foreign goods more expensive, so we would have to settle for fewer (or smaller) giant-screen TVs ... but it would make US manufactures more affordable to the rest of the world, which would likely boost US employment and get our economy back to a pre-recession growth rate.
I'm afraid that any retaliation Putin makes will be much more ugly and violent than financial manipulation. He is a gangster, straight out of Mario Puzo. His vengeance will be written in the innocent blood of his defenseless neighbors.
I have been watching the rates occasionally,, and it was 9.5 a few days ago and just now it is 10.50!
Everybody might laugh,,, but,,, do you know how to gauge a populations economy in a way that the people are feeling it??? Ho-bucks! I have a website that I check from time to time on escorts in Kiev. They have about 20 per page and 3 to 6 pages of them. They also give the rates in Euro, USD and UAH. They now have a whole page worth of 40Euro 50USD and 500UAH! The rates havenft been this low for a long time.
Russian economy grinding to a halt as Ukraine crisis takes heavy toll
MOSCOW (Reuters) - Russia's economy is barely growing, inflation is rising fast, and capital is pouring out of the country, the Economy Ministry said on Monday, a sign that international tensions around Ukraine are already inflicting severe economic costs.
In February Russia's gross domestic product eked out growth of just 0.3 percent year-on-year, down from 0.7 percent in January, Russia's Deputy Economy Minister Andrei Klepach said.
Last year the economy grew by just 1.3 percent, far below initial forecasts, but there had been hopes that growth would rebound this year. Instead Russia's economic performance is deteriorating further as the international tensions around Ukraine lead capital to flee Russia.
Klepach said that when seasonal and calendar factors are taken into account, February's 0.3 percent was "not bad" and "better than expected."
But he added that "it's too soon to talk about a turn-around in economic trends, about a recovery from stagnation."
He said that the ministry anticipates GDP growth of "around zero" for the first quarter as a whole. That would make its 2.5 percent growth forecast for 2014 challenging.
"There won't be a recession, but there is a problem of stagnation: it's length and depth. Unfortunately the investment slump is continuing. I'm not ready to say how long it will continue," Klepach said.
While Russia's economic growth slows, inflation is shooting up. The Economy Ministry expects inflation to reach 6.9-7.0 percent in March, up from 6.2 percent in February.
The sharp rise illustrates how a slumping rouble is feeding into higher import prices, as both Russians and foreigners scramble to get out of rouble investments.
Klepach said that the Economy Ministry forecasts the net capital outflow during the first quarter at $65-70 billion - and "closer to $70 billion".
That compares with an outflow of $62.7 billion during the whole of 2013.
He said that Russia's economic indicators have been deteriorating, even though western sanctions against Russia have so far had only a minor economic impact, because cool relations between Russia and the West damage investor confidence.
"We considered in the forecast how the general deterioration of our relations with developed countries and world markets is having an influence," he said.
"Sanctions so far don't have a significant economic character, but in itself a worsening of relations is a significantly negative factor for economic growth and correspondingly influences the capital outflow."
(Writing by Jason Bush; Editing by Jeremy Gaunt)
About the minor significance of the sanctioned bank: it was chosen because of its direct connection with one of Putin's inner circle. In other words, it's a personal sanction, rather than a drag on the economy.
But the consensus of commentators seems to be, that it was a warning shot. What was done to one Russian bank, could be done to any -- or to all. There's nothing we can do faster or more easily than stopping international financial flows. And from what I've been hearing, there's nothing that will shock the Russian economy so quickly.
The theory of the "warning shot" is that the West is worried that Putin may be getting ready to do much, much worse than he has already done. So the West shoots him through the peak of his hat, showing him that we have lots of ammunition in our belt -- and can shoot him up badly, if we decide that is necessary.
I note the phrase "investment slump" in the article you posted.
The vast capital outflow -- $70 billion in one quarter -- means there is less money inside Russia available for domestic investment. And even in better times, domestic investment is not sufficient -- Russia needs capital from foreign countries for continued economic development.
And here's where Russia's hands are tied. Most of the things Putin could do for "economic retaliation" would be severe -- and long-lasting -- disincentives to foreign investment. For example, if Russia shut down or seized foreign businesses, the percentage of folks willing to invest there would plummet.
There is an American bank that handles the financial transactions for Gazprom, if it is interrupted even for a short time Russia would fall. I think the IMF stated the UAH should be around 9.5 but that was before all the problems started.
Of course, I do not understand this. The caption of this video says that Russia will accelerate their own payment system. I assume that is Visa/MC. I say if they can do that efficiently, they would have done that a long time ago. http://goo.gl/UFvSxa
Good reading. Russia miscalculated China's position on standing with them, Europe's gas is being taken cared of, Russia is looking for higher oil prices at $110, but will get $80... http://goo.gl/OC4Jdf
There hasn't been much chatter on this forum about McDonalds restaurant recently, but in Crimea they have closed down. My lady always had a McFlurry at the Boksal in Simferopol and on the Boardwalk in Yalta. I have been there at different times of the day and night and they were always crowded. Just the beginning of the disappointment to especially the younger crowd. Too bad that McDonalds and Coca Cola were the forefront for western exposure.
Hopeful news from Switzerland: Russia _seems_ to have agreed to de-escalation in eastern Ukraine.
Of course, the proof will be in the pudding.
But this is probably the basis of the Hryvnia recovering to about 11.3 / USD.
Meanwhile, in Russia, the ruble is still hanging close to 36, and the economy (which was already quite weak by the last quarter of 2013) is likely to remain stagnant or even go into recession in the later part of this year, on the strength of the very limited sanctions already imposed by the West.
Apparently the West has been preparing much stronger sanctions in the event of invasion in force -- probably including cutting off Russia progressively from the international banking system. It seems pretty clear by now, that such heavy-duty sanctions would hit Russia's economy very hard.
Russian desire to avoid more economic pain, was probably an important motivator in the reasonable tone they took today in Geneva.
International investors, starting in July must negotiate with US investment firms for disclosure of identities of investors, or they will be subject to 30% withholding. The IRS is after the American investors from overseas. Russia was negotiating to avoid the withholding, but the US has suspended talks.
WHO KNEW? THE FSU'S MOST REPRESSIVE DICTATOR* SPEAKS TRUTH
I mean, Aleksandr Lukashenko of Belarus. Most of the guys on this forum don't talk about Belarus, so here is a little background. In recent years (under Lukashenko's rule) Belarus has been ranked the most corrupt state in Europe: even worse than Russia, Ukraine, and the other former-Soviet disasters. Visitors from other former-Soviet countries describe Belarus as a time machine: it reminds them so much of their own countries, before the breakup of the Soviet Union. Things still run the 'old way' there, and political dissent is not tolerated, at all. Belarussians have to be very mindful about what they say.
Also, Lukashenko is friendlier to Putin than any other foreign leader (in Europe, at least) -- Belarus is Russia's most dependable ally, and the first country to agree to a customs union with Russia.
So it seemed significant to me, when Lukashenko said (not long after the event) that the annexation of Crimea "sets a bad precedent." Russia, even your best friend says you are wrong -- and says it bluntly at that.
On Thursday, Russia and a few of its neighbors signed a treaty creating the Eurasian Economic Union, Putin's long-planned wannabe rival to the EU. Again it was the leader of Belarus, a key member of the new union, who spoke the truth: "We lost someone along the way," said Mr. Lukashenko. "I mean Ukraine."
Taking together population, economic size and potential, industrial base and natural resources, Ukraine was to be the prize: the centerpiece of the Putin's union. Without Ukraine, this union is a pale image of what Putin intended. As American statesman Zbigniew Brzezinski wrote, "with Ukraine Russia is an Empire, without Ukraine its not."
Anybody want to lay odds on Ukraine someday joining Putin's union? If he had acted as a legitimate statesman, he could have preserved the possibility -- by his brutal thuggish gangsterism, he has smashed it into pieces.
*Putin has been steadily, and strongly, increasing political repression in Russia year by year. Lukashenko's lead in this category may be under threat.