Perspectives on the global economic meltdown- (Nov 28 2010)

[TSJones]

Ceiling suspended: US takes on $300bn in new debt after hitting $16.7 trillion

Strange article by the Russkis. Last I checked, the US doesn't have a balanced budget (nor should we have one right now in my view) and will have to increase the debt ceiling sometime in September or there abouts. Not much of a news article.

[Neshant]

SOCIALISM
You have 2 cows.
You give one to your neighbour

COMMUNISM
You have 2 cows.
The State takes both and gives you some milk

FASCISM
You have 2 cows.
The State takes both and sells you some milk

NAZISM
You have 2 cows.
The State takes both and shoots you

BUREAUCRATISM
You have 2 cows.
The State takes both, shoots one, milks the other, and then throws the milk away

TRADITIONAL CAPITALISM
You have two cows.
You sell one and buy a bull.
Your herd multiplies, and the economy grows.
You sell them and retire on the income

ROYAL BANK OF SCOTLAND (VENTURE) CAPITALISM
You have two cows.
You sell three of them to your publicly listed company, using letters of credit opened by your brother-in-law at the bank, then execute a debt/equity swap with an associated general offer so that you get all four cows back, with a tax exemption for five cows.
The milk rights of the six cows are transferred via an intermediary to a Cayman Island Company secretly owned by the majority shareholder who sells the rights to all seven cows back to your listed company.
The annual report says the company owns eight cows, with an option on one more. You sell one cow to buy a new president of the United States , leaving you with nine cows. No balance sheet provided with the release.
The public then buys your bull.

AN AMERICAN CORPORATION
You have two cows.
You sell one, and force the other to produce the milk of four cows.
Later, you hire a consultant to analyse why the cow has dropped dead.

A GREEK CORPORATION
You have two cows. You borrow lots of euros to build barns, milking sheds, hay stores, feed sheds,
dairies, cold stores, abattoir, cheese unit and packing sheds.
You still only have two cows.

A FRENCH CORPORATION
You have two cows.
You go on strike, organise a riot, and block the roads, because you want three cows.

A JAPANESE CORPORATION
You have two cows.
You redesign them so they are one-tenth the size of an ordinary cow and produce twenty times the milk.
You then create a clever cow cartoon image called a Cowkimona and market it worldwide.

AN ITALIAN CORPORATION
You have two cows, but you don't know where they are.
You decide to have lunch.

A SWISS CORPORATION
You have 5000 cows. None of them belong to you.
You charge the owners for storing them.

A CHINESE CORPORATION
You have two cows.
You have 300 people milking them.
You claim that you have full employment, and high bovine productivity.
You arrest the newsman who reported the real situation.

AN INDIAN CORPORATION
You have two cows.
You worship them.

A BRITISH CORPORATION
You have two cows.
Both are mad.

AN IRAQI CORPORATION
Everyone thinks you have lots of cows.
You tell them that you have none.
No-one believes you, so they bomb the ** out of you and invade your country.
You still have no cows, but at least you are now a Democracy.

AN AUSTRALIAN or CANADIAN CORPORATION
You have two cows.
Business seems pretty good.
You close the office and go for a few beers to celebrate.

AN AFRICAN CORPORATION
You had two cows.
The IMF owns them now. They insist you owe them 2 more plus interest.

[shyam]

Peter Schiff at Las Vegas MoneyShow. A must listen for everyone.

[Neshant]

US govt is trying hard to shut down Bitcoin.

Anything like bitcoin that gives people control over their hard earned money is a danger to private banking crooks, the Federal Reserve..etc. They need to keep people trapped in worthless paper money which they control. How else can banks make money - its not like they produce anything of value in society.

They can't find a way to shut down the currency so they're trying to go after the exchange. I predict if they succeed in shutting down the main bitcoin exchange which is called Mount Gox, the private bankers will setup their own bogus exchange to lure people in and try to rig it hoping to destroy bitcoin.

But one way or another, these alternate digital currencies will survive.

Skynet (i.e. society) is becoming self-aware and is fighting back against private banking goons!

[Austin]

Ceiling suspended: US takes on $300bn in new debt after hitting $16.7 trillion

Strange article by the Russkis. Last I checked, the US doesn't have a balanced budget (nor should we have one right now in my view) and will have to increase the debt ceiling sometime in September or there abouts. Not much of a news article.

I read the debt ceiling has been reached this month or was it last but they can continue till September as Fed has find ways to deal with it till then.

[Neshant]

Astonishing how bankers are gambling their arse away and continue to put the rest of society in the firing line for any losses they incur. Things have devolved into a grab-all-you-can crony capitalism with banking goons running wild getting legislations passed to rip off society.

Central banking promotes the kind of parasitic crony capitalism that you see below.

Get your money out of banks - its not safe! Bankers are now using the backstop of FDIC to gamble with your deposit expecting the govt to pay off the tab if they lose the money.

------------

Wall Street Deregulation Advances As Top Democrat Warns That Vote Could 'Haunt' Congress
http://www.huffingtonpost.com/2013/03/2 ... 16795.html

WASHINGTON -- A House Committee approved six new bills to deregulate Wall Street derivatives on Wednesday, advancing legislation that would expand taxpayer support for derivatives and create broad new trading loopholes..

The most controversial bill to advance Wednesday is explicitly designed to expand taxpayer backing for derivatives. It was the only legislation that lawmakers were required to cast individual votes for or against; the others were all approved by unanimous voice votes. The bill to increase taxpayer support for bank derivatives dealing was approved by a vote of 31 to 14.

Dodd-Frank forced banks to move some of their derivatives sales operations out of the unit that receives government insurance, in an effort designed to prevent taxpayers from having to repay depositors if risky derivatives forced a bank to fail. On Wednesday, the House committee approved a bill that would eliminate that safeguard and allow banks to deal derivatives from their taxpayer-backed unit.

Another bill the committee approved Wednesday is referred to by critics on Capitol Hill as the "London Whale Loophole Act," which would exempt overseas derivatives activities from U.S. regulatory jurisdiction. The London Whale trade at JPMorgan was conducted out of the bank's London office.

Another bill requires the Commodity Futures Trading Commission to conduct more extensive cost-benefit analyses than they currently do when crafting regulations -- a measure objected to by critics who suggest it creates busywork intended to handicap the agency.

[Austin]

Michael Pento to Moneynews: Governments May Fall in Coming Bond Market Collapse

[svinayak]

http://moneymorning.com/ob-article/jim- ... ode=118409

Jim Rogers: The One Lie That Will
Bring Down A
By TERRY WEISS, Contributing Writer, Money Morning
Despite the current stock market rally, legendary investor Jim Rogers say the U.S economy is poised for a major crash and is warning investors to protect themselves immediately.

In a riveting interview on Fox Business, Rogers warned Americans not to trust any of the positive economic news coming from world governments.

"I don't trust the data from any government, including the U.S., Rogers said. "We know that governments lie to us. Everybody's printing money, but it cannot go on. This is all artificial."

Rogers, who for years has been an outspoken critic of the Feds policies of "Quantitative Easing" says all the money printing is creating false hope that we are in the middle of some kind of super bull market.

But in reality, he says, "we're living in a fool's paradise."

"The Bank of Japan says it's going to print unlimited amounts of money... Then Mr. Bernanke said I'll match that... I'll print that money too. The Europeans are catching on. You've got money printing going on everywhere and that has never been good for anybody," Rogers said.

Currently, Bernanke and company at the U.S. Fed is buying $1 trillion of Treasury and housing agency bonds each year. That's about $85 billion per month against a budget deficit that is about the same level.

The real risk right now is an all-out 1930s-style currency war that could devastate an entire class of investors who have put their faith in the current economic dogma of endless bailouts and money printing

"It cannot go on," Rogers warns.

Rogers believes things will really get bad after the German elections this fall

How bad?

Worse than even Roger predicts, according to a new investigation.

In a newly released documentary that went viral last month, a team of influential economic experts say they have discovered a "frightening pattern" they believe points to a massive economic catastrophe unlike anything ever seen before.

"What this pattern represents is a dangerous countdown clock that's quickly approaching zero," said Keith Fitz-Gerald, the Chief Investment Strategist for the Money Map Press, who predicted the 2008 oil shock, the credit default swap crisis that helped bring about the recession, and the Greek and European fiscal catastrophe that is still wreaking havoc until this day.

"The resulting chaos is going to crush Americans."


The work of this team of scientists, economists, and geopolitical analysts has garnered so much attention, they were brought in front of the United Nations, UK Parliament, and numerous Fortune 500 companies to share much of their findings. Click on the short video above to see the eerie pattern.
Another member of this team, Chris Martenson, a global economic trend forecaster, former VP of a Fortune 300, and an internationally recognized expert on the dangers of exponential growth in the economy, explained their findings further:

"We found an identical pattern in our debt, total credit market, and money supply that guarantees they're going to fail," Martenson said. "This pattern is nearly the same as in any pyramid scheme, one that escalates exponentially fast before it collapses. Governments around the globe are chiefly responsible."

"And what's really disturbing about these findings is that the pattern isn't limited to our economy. We found the same catastrophic pattern in our energy, food, and water systems as well."

According to Martenson, these systems could all implode at the same time.

"Food, water, energy, money. Everything."

[Neshant]

bunch of guys got laid off at my workplace today.

exactly in what area is the so called improvement in the economy taking place.

it must be in banking, govt employment and other useless sectors of the economy that are beneficiaries of money printing, running up the debt & draining wealth from society at large.

it sure as hell is not the real economy producing real goods.

[Neshant]

If indeed the G7 is trying to scare money out of tax havens, India should formulate a plan to have at least some of this enormous loot flow into its coffers. State banks should be directed to allow overseas individuals Indians or not to open accounts in India. Obviously can't trust local branches of foreign banks as they will simply send the info on depositors back to their home country. But state banks are under no such obligation to hand over any customer data.

Let the flow of loot begin ¡¡

Make Way for the Killers & the Great Tax Haven Roundup

http://www.thedailybell.com/mobile/bell ... m?ID=29130

[member_26147]

http://moneymorning.com/ob-article/jim- ... ode=118409

Jim Rogers: The One Lie That Will

"We found an identical pattern in our debt, total credit market, and money supply that guarantees they're going to fail," Martenson said. "This pattern is nearly the same as in any pyramid scheme, one that escalates exponentially fast before it collapses. Governments around the globe are chiefly responsible."

"And what's really disturbing about these findings is that the pattern isn't limited to our economy. We found the same catastrophic pattern in our energy, food, and water systems as well."

According to Martenson, these systems could all implode at the same time.

"Food, water, energy, money. Everything."

While the fundamentals are a bit weak, and the stock markets are pushing higher against the grain and will correct soon, 'Everything' is not going to implode at the same time. These study groups and think tanks have an agenda. They are either long Gold/SPDR shares or heavily invested in commodities and are mostly jealous that they couldn't ride the stock market during the best surfing season.

Energy-wise, USA can no longer be held hostage by the middle east with the commercial viability of fracking for natural gas and crude oil. This itself has been a very important milestone for stock markets to climb faster.

Food and water wise, USA is still very well set considering it owns Alaska, and water index of North America ranks pretty well. Not to mention, the yields from genetically modified seeds has been growing proportionally to population growth.

Moneywise, USA is not Europe. Europe is in a lot of debt which is unsustainable while at the same time bleeding its industrial base. USA still has Ford, GM and Chrysler competing in world markets and securing a share of China, India, Brazil, South Africa and other rapidly growing economies. Yes, the banking sector in the USA is filled with crooks, but so long as innovation can catch-up, there will be room to grow.

[Theo_Fidel]

Moneywise, USA is not Europe. Europe is in a lot of debt

Well we should clarify before saying such things.

Before the crisis
Irelands public debt was 20%+/- of gdp
Spains public debt wass 35% of GDP.
UK was at 40% of GDP

EU as a whole was 65% or so, not really onerous.

So what happened.
Ah! Neshant you want to step in here.

[member_26147]

Moneywise, USA is not Europe. Europe is in a lot of debt

Well we should clarify before saying such things.

Before the crisis
Irelands public debt was 20%+/- of gdp
Spains public debt wass 35% of GDP.
UK was at 40% of GDP

EU as a whole was 65% or so, not really onerous.

So what happened.
Ah! Neshant you want to step in here.

You're talking about total public debt as a percentage of GDP, I guess. You should see the external debt of European countries vis-a-vis USA. Public debt bonds held by the citizens never gets paid in the long run and every country tries to water it down through inflation. Social security and Medicare are going to be extinct soon because they are not affordable. But that is not going to reduce the bond rating of a country.

EU is drowning in external debt with a contracting GDP for the foreseeable future except for Germany and France which is what exacerbated the situation in 2009 and may cause some havoc in the markets again. The biggest country about to go belly up is Japan. All the macroeconomic factors point to an economic implosion no matter how much Mr. Shinzo tries to revive it.

[TSJones]

Not to get too pedantic here, but the Euro situation is different from the US not because they have more debt when in fact, they have less(the US has 100% GDP debt), but because they are structured differently.

Unlike the US, the Euro Union is a combination of governments, that has different taxation levels, different public policies, etc. But, they have a united central bank that issues a single currency (just like the US). However, ulike the US, there is no single entity to that has the taxing power and the ability to issue bonds based upon that taxing power(I think, but I could be wrong here).

To illustrate, it is the same as if California and New Jersey decided to have a central bank but each state follows it own taxing and bond issuing authority. There is no one governmental authority behind the ECB (Euro Central Bank). Thus you have the government of Greece issuing bonds like mad (also Ireland), that cannot maintain the bonds with the taxes they have unless they make deep spending cuts. The ECB will not step in and buy the bonds otherwise.

In the US, there is no problem with this. The Fed buys US government bonds regardless and makes its member banks hold them as reserves. It doesn't even buy state issued bonds. No way, no how. It's all one government, that is to say, all of one government issuing bonds and all member banks MUST HOLD THESE BONDS. Cha ching. To be sure, the Fed decides its own reserve requirements, its own interest rate (discount window) and what it will bid at public auction for US bonds(debt) but it uses the US government resources and legal power to do so. And any profit it makes is returned to the US treasury.

For your perusal and edification:
http://en.wikipedia.org/wiki/Eurobonds

[member_26147]

Not to get too pedantic here, but the Euro situation is different from the US not because they have more debt when in fact, they have less(the US has 100% GDP debt), but because they are structured differently.

No, Europe has more net external debt as a percentage of GDP compared to US. You cannot be comparing absolute debt between US and Europe by ignoring the size of the economies, are you?

I do agree about the debt structuring part though. Most debt throughout the world is held either in the country's currency which is sold to their own people or is held in bonds sold by the US treasury which is denominated in dollars. Thus, it helps the US if it there is an inflationary deterioration of the dollar over the longer term, which means it would have to pay less than what it took over as debt. This is what makes the US powerful and is a disadvantage for other countries, since they cannot loan each other in their local currencies.

[svinayak]

PRC is moving away from dollar

https://globalconnections.hsbc.com/cana ... ack-switch

The redback switch
Global Report
Doing business in RMB translates to more cash in the pockets of multinationals

As China’s renminbi (RMB) continues its ascent as one of the world’s most-used forms of payment, North American businesses are discovering another good reason to cozy up to the redback: There’s more money in it for them.

China is the United States’ second-biggest trading partner and American companies doing business with the Asian giant and managing their cash and transactions in RMB are realizing pricing discounts and other cost savings—in addition to the appreciation factor of the currency. The RMB, which has appreciated 30% against the U.S. dollar since exchange rate reforms in 2005, is still gaining, albeit at a more measured pace. Forecasts are for another 2% gain this year.

More bankable though is the push by China’s policymakers and businesses to conduct trade in the RMB, and the resulting incentives. A recent survey by HSBC Bank found that 41% of Chinese companies were offering discounts of up to 3% for doing business in RMB. Six percent said they were offering price breaks of 3%-5%, while a further 2% said they were offering discounts of 5%-7%. Some large North American companies have secured discounts as high as 15% from their Chinese partners by settling in RMB.

Despite the mystery that still surrounds the renminbi, the reason for the price breaks is simple: The cost of doing business with China is lower when transactions are conducted in China’s own currency instead of the U.S. dollar.

Lewis Sun, head of sales, global payments and cash management for HSBC in China, said the reduction in currency exchange risks and costs, as well as the convenience, are big incentives for U.S. companies to switch to the RMB when doing business with Chinese companies.

Traditionally, sales or expenses conducted in U.S. dollars had currency exchange exposure built into the pricing, he explained. “So the price would contain a currency exchange premium. But if the whole settlement is switched into RMB, the price buffer can then be removed,” Sun said in an interview on a recent visit to New York and Toronto to talk about China’s rapidly changing currency regulations and how North American companies can benefit from the RMB. HSBC, the largest foreign bank in China, is promoting 2013 as the “Year of the renminbi.”

Sun noted another selling point for switching to the RMB: Determined to increase the circulation of the RMB in global markets, China’s authorities look favorably on trades settled in RMB, which could mean more convenient treatment for companies when it comes to getting their paperwork approved.

Indeed, China’s central bank, the People’s Bank of China, is forecasting one-third of China’s trade will be settled in RMB within the next two to three years, up from 13% today. As the world’s top exporter, the sheer volume of transactions could propel the RMB into one of the top three global currencies.

The RMB’s race to internationalization—four years ago it was a rarity outside China’s borders—and the relaxation of most of the rules around trading in RMB, is helping to demystify the currency among American companies, Sun said. “Many of the locally based U.S. companies have already started to use the RMB for trade-related collections and payments.”

More important, multinationals are beginning to incorporate the RMB into their global operations. “Traditionally, companies considered China on a standalone basis. It was not easy to integrate the RMB into other operations,” Sun said. “But companies should feel confident their cash in China is not trapped.”

Sun outlined three RMB cash management strategies for companies:

Bringing RMB into China: The world’s largest destination for foreign investment, it has become relatively easy for companies to inject capital into China. Increased RMB liquidity in offshore financial centers such as Hong Kong, London or Singapore, has made it even easier. Companies can raise RMB funds offshore to invest in their China operations, usually at more favorable rates than onshore, because interest and exchange rates in these centers are market driven. This strategy eliminates FX exposure, and approvals are not required when injecting RMB into foreign enterprises in China.

Working capital for China operations: Increased access to an expanding number of high-quality, low-cost financial vehicles in China, such as RMB money market funds and cash deposits, are providing more options for foreign companies to fund their China operations. As well, intercompany loans in China are fairly straightforward and the automation to do them is becoming more sophisticated.

Getting cash out of China: A main area of concern for multinationals, Sun said there are already a number of ways to get excess cash out of China and into other areas of a company’s operations, such as transfer pricing, intercompany loans and dividend payments. But a pilot program launched last year in Shanghai promises to breach this last psychological barrier for U.S. companies. In the pilot, an automated process allows companies to use the RMB for overseas project financing or direct overseas investment — without the need for government approvals. The expectation is China will soon be rolling out the program nationwide.

With the controls being lifted, the main holdback for North American companies switching to the RMB is a lack of knowledge, Sun said. “Four years [for the internationalization of the RMB] is not a long time and companies need to prepare for the transformation. But they can benefit from using the RMB,” he said.

[TSJones]

Debt as percentage of GDP. CIA estimate and IMF estimate:

http://en.wikipedia.org/wiki/List_of_co ... ublic_debt

[Theo_Fidel]

All of these semantic avoid the main question of where did all this debt come from. These countries were mostly low public debt countries yet now they groan under massive public debt that is causing them to fire workers left and right. Think it through folks, who is benefiting and who is getting shafted.

[Neshant]

A lot of GDP measurements are bogus.

Its nothing more than leveraged up debt being cast as wealth.

That's the only way a country which produces almost nothing like Greece can be counted as a developed economy.

We'll soon find out how much substance there is in GDP numbers.

[member_26147]

All of these semantic avoid the main question of where did all this debt come from. These countries were mostly low public debt countries yet now they groan under massive public debt that is causing them to fire workers left and right. Think it through folks, who is benefiting and who is getting shafted.

This has been hashed over and over. Maybe you should post what you intend to get to, rather than making cryptic statements.

[svinayak]

https://ir.citi.com/I5WkH80XEO1nCEn9ZS7 ... Zz3N3Z0%3D

Mind the gap
Investing in repressed markets


Nishant, Can you comment on this

[Austin]

Demise of the US dollar: World no longer trusts the American policy makers

After the end of World War II the US dollar replaced the British pound as the main reserve currency of the world. The currency reserves of the world’s central banks are mostly kept in dollars and most of the commodities essential to the functioning of the world economy are priced in dollars.

The unbalanced federal budget and the growing debt of the United States greatly in­crease the risk of US dollar devaluation, there­fore threatening its status as a world reserve currency. The currency which serves as the store of wealth for the governments and cen­tral banks of the world should not be exposed to devaluation risks. The quantitative easing stimulus used by the Obama administration to kick-start the ailing American economy is often viewed as an exercise in unbridled mon­ey printing which allows the US government to export inflation around the world and buy votes at home at the expense of the foreign holders of dollar-denominated currency re­serves.

A sign of global distrust in the way the US government manages the world’s most impor­tant currency is the resurgence of gold as an investment and as a currency. Central banks of China, Russia, Brazil, South Korea, Kazakh­stan, Philippines, Mexico, South Africa, Paki­stan and Turkey have been buying gold from local mines and international markets. Last year was a record breaking year for central bank gold demand as the world’s monetary authorities bought 534.6 tons of the yellow metal. The recent drop in gold prices left the central banks unfazed. Dominic Schnider, head of commodities research at UBS AG’s wealth-management unit in Singapore told Bloomberg that “central banks are here to stay as net buyers; they are probably the ultra long­term investors”. Gold is often regarded as an ultimate reserve currency because it cannot be “printed” at will. The mainstream media and the political cheerleaders of quantitative easing try to downplay the importance of gold as an alternative to the US dollar. Such attempts are easily explained by Peter Schiff, an American investment broker, author and conservative financial commentator who be­lieves that “politicians don’t like the gold standard, because it keeps them honest”.

Gold is not the only competi­tor for the role of the currency that will replace the weakening US dollar. China is trying to break free from its dollar de­pendency and is creating a web of bilateral “swap lines” and trade agreements that will help the internationalization of the Yuan. Before the beginning of the American economic crisis, almost all of the Chinese exports were priced in US dollars, re­gardless of the geographical lo­cation of the buyers. Now, China is trying to switch its trade to Yuan. If the European, African, South American and Asia buy­ers of the Chinese goods require the Yuan to pay for their pur­chases, China will achieve its goal of creating a Yuan-based economic ecosystem. This eco­system is likely to gradually re­duce the global influence of the US dollar, confining its use to the North American continent. According to a report by the Organization for Economic Co­operation and Development, China will become the world’s largest economy, overtaking America, around 2016 so it is only natural for its currency to become the main currency of the world economy.

China is not the only coun­try trying to reduce the world’s dependency on the US dollar. BRlCS control more than half of the world’s trade, 40% of the la­bor force and 25% of the world’s GDP. A big part of the influence of the dollar is due to the fact that institutions like the IMF and World Bank give dollar- based credits to countries around the world. For the worlds’ corpo­rations, dollar-based financing is the cheapest and most accessible. The BRICS aim to change this situation and are actively financ­ing African, European and South American countries which are taking loans in Yuans or Rus­sian Rubbles. Moreover, BRICS countries are becoming the creditors of choice for the Euro­pean companies. Replacing the current dollar-based financial system has become a top priority for the BRICS leadership. One of the points of the official Russian “Strategy for BRICS participa­tion” signed by the President Vladimir Putin states that one of the goals of BRICS is the “reform of the global financial system for the creation of a more represen­tative, stable and predictable sys­tem of world reserve currencies”.

The reputation of the dollar is getting clob­bered by each fiscal mistake made in Washington and each rise of the debt ceiling. Even the geeks and the hackers of the digital age are jumping on the bandwagon of alternative currency creation. A digital, encrypted, peer-to-peer currency called Bitcoin has emerged from the cypherpunk subculture and has taken the internet by storm. Bitcoins can now be used for buying web servic­es, guns, gold, pizzas and even cars. So far, Bitcoin looks like a grassroots attempt to use technology where American politicians have failed.

The American mainstream media has made a habit out of demonizing anyone who tries to circumvent or reform the dollar system. The Chinese are being accused of “stabbing the dol­lar”; gold investors are labeled “gold bugs” while the users of Bitcoins are being accused of money laundering without any proof whatsoever. The world can’t be forced to use the dollar at gunpoint. Why would anyone want to price goods or store wealth in a currency which is being continuously debased? What happens if the President of the US decides to naturalize 15 millions of illegal aliens and grant them the right to use Medicare, Medicaid and provide them with foodstamps? Such expenses can only be financed through ob­scene amounts of freshly printed money. In such a scenario, the dollar could lose half of its value overnight. Why would anyone trust a currency exposed to such risks? The main enemies of the dollar based currency system do not come from Beijing or Moscow or a secretive hacking com­munity. The main enemies of a strong and reli­able dollar are located in Washington DC. Until the American budgetary mess is sorted out, the rest of the world, along with free-spirited Ameri­can citizens, will have to look for alternatives to the once mighty US dollar. Deprived of the privileges given by the dollar’s role as the world’s reserve currency, the US will not be able to pay for imports, finance its army and provide social security to its citizens. The fall of the dollar sys­tem will force the US government to default on its debts and cut its budget. If Washington’s reck­less policy doesn’t change, America will become a second-rate country engulfed in poverty, price inflation and social unrest.

This article was originally published in Washington Times newspaper on May 9th, 2013 and is part of Russia Debate in Washington Special Project co-sponsored by The Voice of Russia and Russia House Associates.

[Austin]

Russia’s External Debt Rises 3.7% in Q1 to $565 Bln

Russia’s foreign debt - calculated by international methodology that includes the corporate sector’s external liabilities - grew by 3.7 percent year on year in January-March 2012, to an estimated $565.25 billion, the Central Bank reported on Wednesday.

The Russian government's foreign debt grew by 4.7 percent in the first quarter of 2012 to $34.76 billion while the foreign liabilities of Russia’s monetary authorities fell by 2.3 percent to $11.47 billion as of April 1, 2012.

The external liabilities of Russia’s non-financial sector grew by 4.9 percent in January-March 2012 to $354.56 billion while the foreign debt of Russian banks to non-residents grew by 0.96 percent to $164.45 billion.

Russia placed $7 billion worth of sovereign Eurobonds in late March 2012, which were not taken into account in the Central Bank’s statistics as their technical placement is scheduled for April 4.

[Austin]

Slow Growth Could Delay Russia Military Spending

Speaking to reporters as he presented new weaker budgetary figures for the years to come, Anton Siluanov said, "Together with the Defense Ministry we have to look into the possibility of postponing a part of the (arms) spending." He said the purchase of weapons may be postponed for two or three years, but only if the Defense Ministry agreed to the proposal.

The economy ministry last month cut its 2013 growth forecast from 3.6% to a more moderate rate of 2.4%, which was approved by the government last week. Based on this outlook, the Finance Ministry expects the budget deficit in 2014 to widen to 0.6% of gross domestic product from an earlier estimate of 0.2%. For 2015, the deficit is expected to widen to 0.7% of the GDP from an earlier figure of 0.01%.

The minister also said the country's Reserve Fund, which accumulates revenue from oil and gas, won't reach 5% of GDP in 2014 and 7% by 2017, as planned. Some of the oil revenue will be used to finance budget spending amid lower revenue from taxes and privatization.

However, Mr. Siluanov said the size of the fund is enough to withstand external shocks, notably a fall in oil prices.

He added that Russia isn't planning to increase its borrowing, keeping its sovereign net debt level at about 11% of GDP.

[Austin]

What is Russia rational behind keeping Debt at 11 % of GDP when there are so many countries that comfortably survives at 50-60-80-90-100 + % of they GDP to Debt Ratio.

Even within BRICS Russia Debt to GDP is lowest with Brazil at 50 % India at 70 % and China at 20 % of its GDP , So what is the rational behind keeping Debt so low , why not borrow more and stimulate the economy when they have so low debt ?

[member_20292]

whom will they lavish the cash on?

do they want to go the greek route?

[paramu]

Russia defaulted once and learnt the lesson hard way. Once you borrow a lot of money, especially from outsiders who are actually not your well wisher, and do not own the hard currency, it knows that that will be a leverage against it.

[Austin]

Russia defaulted once and learnt the lesson hard way. Once you borrow a lot of money, especially from outsiders who are actually not your well wisher, and do not own the hard currency, it knows that that will be a leverage against it.

Thats one aspect but what about internal borrowing , countries have huge debt with internal borrowing as well , infact as we are told most of our debt is internal.

[paramu]

Russia has a lot of business tycoons who are loyal to their financiers in the west. They can play havoc in internal borrowing, causing its currency to go Zimbabwe way.

[Austin]

So are you saying Russia cant borrow internally or externally because some evil west will play havoc , they can borrow for sure as their debt is low but perhaps they might be keeping low because of the Common Economic Space where Rouble would become currency for trading nations.

[TSJones]

^^^^^^^^^Nobody in their right mind is going to buy Russian debt, other than Russian connected financiers. Geezus.......

[Austin]

They do except that Russian Government has to pay a high interest rate.

http://www.bloomberg.com/news/2013-05-2 ... -bids.html
http://www.tradingeconomics.com/russia/ ... bond-yield

[Austin]

From what I understand speaking to few Russians is

1 ) Lenders (banks, hedge funds, etc) will not lend to Russia cheaply
2 ) Russians have not yet developed as large an investment/savings culture as Westerners (due to getting burnt badly in the 90s)
3 ) Strictly monetarist policies by all recent Russian Finance Ministers and Central Bank heads, who would better end up dead rather than borrowing, in a sort of a reaction to the '98 crisis
4 ) Russia depends on Oil and Gas ( 50 % of Budget Revenue comes from Oil/Gas ) so keeping Debt low takes care of future needs should Oil/Gas Market gets impacted.

[Neshant]

Russian citizens fear their own banks closing shop suddenly and wiping out their savings as happened in the 90s. These were mostly private banks. I think some must have been setup by foreign intelligence agencies to sow chaos in Russia through induced bank runs.

Most Russians keep their money in state banks these days.

Banking & financing con artistry has been used to bring down many a great nations through out history.

[Neshant]

Midway through the interview features Jim Rickards.

Worth listening to.

[svinayak]

At 20min - china is being allowed to accumulate Gold so that they dont get angry. Gold price is being suppressed to help Chinese.
China is being made a sucker

[Austin]

Not just Chinese but even the Russians and few other countries are buying gold

Russia and Kazakhstan continue gold spending spree

I believe Chinese are buying gold because they plan to make their currency fully convertable sometime this year end or next year so buying gold makes sense for them , Russia is looking at 2015 period when EurAsEC Customs Union comes into force and they would want to become Rouble a regional currency or currency of trading for CIS.

But there are countries with far bigger gold reserves namely US , Germany , Italy , France etc

10 Countries Anxiously Watching Their Massive Gold Hoards Fall In Value

[Austin]

Midway through the interview features Jim Rickards.

Worth listening to.

So is it good to invest Gold and buy Yuan as prices would rise by next year ?

[svinayak]

Yaun is not liquid enough

Outsiders cannot hold yaun for currency futures and currency speculation

[Austin]

Yes but thats right now eventually Yuan will be fully convertable for any one to buy sell or trade just like USD or Euro isnt it ?

Yuan is kept artifically so low now that even if you buy it 6 months down the line you would not end in loss and if they do make it fully convertable then prices would definately rise is what i feel.