https://smaulgld.com/russia-adds-600...rves-december/
Yet at the same time they are burning through their currency reserves trying to stop the collapse of the ruble against other currencies. At current rates, those will be gone in less than two years. Their budget defict is soaring as well. They can't pay their bills but are buying gold. http://business.financialpost.com/20...ussia-economy/
Russia is putting their stash of Federal Reserve Notes back in circulation? And their stash of Euros too?
No wonder QE is over, but the FRN devaluation continues and inflation is still rampant.
And does the European economy really suck so bad that they're really going to do Euro QE even as Russia is dumping Euros? And the Fed feels the need to keep up lest the dollar be enough stronger than the Euro that no Europeans buy our products?
Which currencies will the ruble take down with it? Is dicking with the Ukraine and shoving neo-nazis down their throats really worth all of this? Can these natural gas producers really find no better way to do business than to wreak all this havoc?
Or is this a matter of economic havoc is good, because it should bring about World War III?
No wonder Germany is trying to fill its vaults with gold as well. Of course, any private citizens who do the same are simply delusional...
How does having reserves an enough to defend their currency == "can't pay their bills"? What bills exactly aren't they paying while they buy the Gold? I mean, as bad as their situation is made to sound in that article, it sounds better than ours with a debt in the trillions.Quote:
Originally Posted by Zippyjuan
Not the same things. Russia has gold reserves and foreign currency reserves. They are selling their foreign currency reserves to buy rubles to try to keep the value from falling too much.
The other issue is revenues. They get 90% of their government revenues from energy taxes and with the price of oil plummeting, so have their government revenues. That has lead to huge budget short-falls. Yet they are still using some of that revenue to buy up gold.
So exactly which bills have they been unable to pay?Quote:
Originally Posted by Zippyjuan
Ok- technically they are being paid but they are borrowing more money to do so. That means they are technically borrowing money to buy gold. They need oil to be about $100 a barrel to balance their budget.
Who are they borrowing money from? I didn't see anything in that article that said they were borrowing money. TIA. Or do you mean they are spending their savings to pay their bills?Quote:
Originally Posted by Zippyjuan
So why do you think they are buying Gold at a time when the ruble is facing troubles? Perhaps having Gold reserves might do more to strengthen their currency more than just having the govt buying it up?
Like the US and other countries, Russia borrows by issuing securities or bonds. Compared to the US, their debt level is very low and so is their deficit but it is rising. Russia defaulted on their debt in 1999 so they have also not been accumulating debt as long as the US has. http://www.cnbc.com/id/102267423#.
(Yields on US debt are around two percent on ten year notes for comparison)Quote:
Since this summer, Brent crude oil has fallen from above $115 per barrel to around $61.08 a barrel in Asian trade Monday, with many analysts predicting prices will continue to slide. At the same time, the ruble has dropped around 70 percent since the end of June, with the U.S. dollar fetching around 58.2 rubles Friday.
Government debt not a worry
Only around $38 billion of Russia's government debt is denominated in dollars, and of that amount only around $6 billion of interest and principal payments are due in 2015, compared with around $400 billion of foreign-exchange reserves, Wells Fargo noted. With around two-thirds of government debt borrowed in rubles, the central bank can theoretically create enough rubles to pay off those creditors, the bank said.
Obviously, that creates inflation risks. The cost of Russia's borrowing has climbed recently, with its 10-year ruble-denominated sovereign bond yield around 13.00 percent Friday compared with 8.33 percent at the end of June, according to Reuters data.
Russia's central bank raised its main interest rate by 100 basis points to 10.5 percent on Thursday – the latest in a series of hikes this year as it attempts to rein in inflation and bolster the country's struggling economy, which also faces headwinds from sanctions from the West due to its conflict with Ukraine.
Quote:
Originally Posted by Zippyjuan
Sounds to me like they are in pretty good shape given those numbers. The low oil prices won't last forever; but adding to their reserves could have a positive long-term effect.