If the question is how much can you spin a coin? then the spin put on the rouble by the media today surpasses all know records!
The sudden and dramatic movements of the Rouble are no accident and certainly not random. A lot of time and effort has been put into bringing these circumstances into being.
It is of course the direct economic facet of the campaign against Russia.
Two simple facts to bear in mind when considering all else,
1) Somebody somewhere is selling currency in very significant quantity at a very significant loss and somebody else is buying a bargain.
2) Russia has; in recent years, progressively stopped selling its Oil and Gas in US dollars and now principally demands payment in physical gold or goods in kind.
The foundations of the current "crisis" has been the two fold depression of both the oil and the gold markets through significant oversupply. This is worked as double whammy against the rouble, the value of which is largely supported by the value of its energy exports and which has been also supported by a massive gold purchasing programme initiated by the Russian government and undertaken to enable gold to underpin the value of the currency as it moves away from dependency on the dollar and sale via the petro dollar.
Hardly surprising if you weaken the pillars on which the rouble is supported, that the rouble will weaken. Now it has clearly hit a specific benchmark and the currency speculators have waded in and shorted the rouble so significantly that Institutional holders have no option but to offload their rouble positions, which of course is what we have seen today.
Time to reconsider the two points identified a little earlier.
1) Somebody is taking a massive haircut selling huge quantites of the rouble for a song, while somebody else is buying a bargain. The same logic applies equally to the gluts of oil and gold on the market. Russia may need Oil at about $105 a barrel to balance its books, but so too does Saudi Arabia.
This means that while the negative effects of the gluts and consequent run on the currency are quite real, the circumstances in which they occur are highly contrived and just as damaging to those that have framed and executed the policy, as they are against the intended target.
Time to think about this in consideration to point two.
When a currency goes into freefall, the response from a Central Banker is almost automatic. Purchase large amounts of strong international currency to sure up the value of your own. Historically this has almost exclusively meant buying the US dollar.
It is therefore a virtual given that the whole contrived edifice has been to force Russia back into the "Dollar Standard" and try and throttle the Sino-Russian/Eurasian dollar free exchange system at birth.
Has it worked?
No and I doubt if it will.
It looks very much as though Russia has decided to tough it out. There are only so many institutional roubles that the West can dump and a limit to the losses that speculators and institutions will be prepared to shoulder before giving it up as a bad job. Same goes for the costs and losses incurred by flooding the gold and Oil markets.
How apparently is Russia and its close strategic allies reacting? The opposite as expected. They are buying up the cheap gold, the cheap oil and the cheap roubles, just as earlier they hoovered up the cheap shares, when sanctions caused western investors to disinvest sanctioned holdings.
The medium of purchase used to pay for the bargain bonanza? The forex supply of dollars and dollar denominated bonds of course, which have boomed in value against the three commodities under consideration.
The ultimate consequences I will leave to you to discern for yourselves.
the most recent gazeta.ru article
says on Friday evening Mr. Putin met some most important Russian businessmen (there was 41 one of them) to support Ruble by selling the export revenues in US Dollars earned by the companies controlled by them (interestingly,
was also present -- according to gazeta.ru) ... I don't know if there's any interest in it here, so I'll be very brief:
Chapter "Hand Over Foreign Currency" suggests about $10b can be obtained this way and sold until the end of 2014 (the goal is Russians don't run on banks)
Chapter "Intimate Talk" says during three days before the meeting many important businessmen had been contacted, asked like "Do you know about the Ruble situation?" -- "Yes, I do." -- "Could you help by selling part of your Dollar earnings?" ... and left to make their choice (they were informed the companies would not be forced to sell)
Chapter "How Much Is There?" reminds
- Mr. Putin during his December 18 press-conference suggested there was about $300b possessed by exporters;
- so far in 2014, to support Ruble about $85b was spent by
- it's difficult to say how much actually are the exporting companies' reserves (obviously the companies have both Dollars on their accounts, and Dollar loans)
Chapter "1998 — 2008 — 2014" reminds
- 1998 Crisis extinguished using exporters' money (forcefully)
- 2008 Crisis extinguished using Reserve Funds of
(these funds amounted to $600b then, now are one and a half times smaller);
as for 2014, suggests $60 per barrel is like breaking-point (if oil prices became higher than that, Ruble would start to be stronger; if lower, it wouldn't)
