Current Affairs Ukraine

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Martin Alvito said:
I don't think you're understanding what I'm saying. Item #1 is self-evident. Item #2 addresses LL's 100% accurate point re: physical limitations on the amount of available physical currency available to ordinary Russian citizens with deposits denominated in rubles. They want rubles, but you know you're going to run out of physical rubles. So you refuse to provide physical rubles, hand citizens something else instead that effectively keeps the money in the banking system for the time being, and declare it legal tender.

Item #3 is regarding frozen central bank reserves, which are not the same as ordinary bank deposits. This subject gets messy and while I understand it, you want someone more qualified than me in that arena explaining that one to you. Long story short, this is how you solve the USD/other currencies problem if you're Russia and all your foreign depositors pull their money out to a degree that cannot be covered. You raise capital among speculative investors, and worry about the consequences later.

It's not much different from Goldman going hat in hand to Buffett and paying him an 8% guaranteed rate of return in order to bail them out in 2008. It will be messier, because Goldman was arguably a stronger institution despite their dire financial straits at the time, but liquidity is a service and someone will provide it at the right risk premium.

Domestic USD withdrawals are solved in other ways, in part. Kompromat can be a useful thing, the oligarchs know that they can't all have all of their money because then they all go down together, and they've all been diversifying into foreign real estate anyway for a rainy day such as this one. They sell some dollar-denominated assets for cashflow when they want to do dollar-denominated things, which they don't much like, and life goes on.

Said undergraduates were not all from the US, thank you very much. Substantial majority, yes. The undergraduates came from all over the world, including Europe, China and various other Asian countries, and I had students from those places. I can tell you that these blind spots were a systemic problem not limited to US-born students.

100% that I never had a student from Africa or South America, though some were enrolled. They didn't go in for squishy BAs in the social sciences. Now if you want to talk about where I got my BA, that was almost all Americans.

In any event, the Asian tigers aren't germane to the discussion because that was a different type of financial crisis. No frozen assets means no IOU sale.

Russia is not North Korea, but Putin has a freer hand than Western analysts seem to think. You can't do this stuff in a Western democracy because overriding existing laws to do this stuff requires an act of volition by legislators that you're not going to get. This is why Geithner et al solved the 2008 problems in the manner in which they did. Members of Congress were not going to approve measures whose consequences they did not understand at that time, so anything requiring an Act of Congress was not a valid move.
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catcherintherye said:
I am inclined to agree with much of this.

And the concern is, ordinary Russians wont be able to use banking, and the super wealthy Russians will be able to exploit that liquidity crisis. If that plays out, it is a grave injustice.
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PhilM said:
It is. Yet, while it's regrettable for the masses, it may help undermine Kremlin's power if it significantly impacts on public opinion.

Russian mothers are going to start burying their sons; this 'lightning' war is likely to drag on; families may start to struggle in terms of their livelihoods.

Russia's problem has been many countries who were in the sphere of the USSR looked west with envious eyes, and now their own citizens may do the same.

Hopefully, the Ukrainians are able to repulse these offensives and inflict heavy casualties. Even if Russia does win the war, which is likely, what happens then?

Unless they're willing to keep serious numbers of troops in the Ukraine, it'll be difficult to maintain a puppet regime. Even then, it's going to stay costly.
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Martin Alvito said:
Absolutely. A few relatively ordinary Russians would probably make a great deal of money trading a secondary IOU/rubles market, and everyone else ends up a little worse off on average. That's more or less how the present Russia was built and works today.

I don't know whether the oligarchs broadly would have the cashflow to exploit the hypothetical central bank IOUs. I don't have the data. My guess would be that broadly they would end up in the hands of Western hedge funds, unless legislation were passed to stop that. Given the state of internal politics in the US and other places, my money is on them finding a harbor.
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catcherintherye said:
So essentially, we strengthen the very conditions that we are meant to be stopping, and cause more inequality and misery to ordinary Russians?

That sounds like a proportionate and sensible response.
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PhilM said:
With all sincerity, it was not a throw away phrase nor was it glib. It is regrettable that the Russian population will suffer, and I mean that.

However, the shameful acts originated with the Russian invasion of a sovereign nation, and ultimately strict sanctions are a tool to help stop the aggressors.

Genuinely, unless we attack Russia, which will cost many more lives, what else do you recommend apart from rolling over and letting them succeed?

The blame that'll be viewed negatively will be Putin's decision to invade. If it helps destabilise his power base, it will have done its job.
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If you require FX or physical cash as an individual, company, institution or bank and are unable to either:

1: Withdraw 'sizeable' funds quickly
2: Facilitate international bank transfers
3: Hold foreign currency

Then an IOU isnt going to help you and it certainly wont help the economy short/mid/long term as it will continue to sink.

Whenever FX and SWIFT open up again then the domestic currency will be massively devalued and the risk profile would be insane. How have you hedged the risk when you cant use FX?

If im running an investment vehicle would i be willing to do back door business with Russia if i could navigate the sanctions? Perhaps...but am i going to take such an enormous risk to lend currency over a long term period when the local currency is being printed at a very low rate? The timeframe risk is immense...in Russia of all places as well?

That makes no sense to me, how would you even get collateral from Russia or Russian companies?

The only thing i could see an investment vehicle doing is to go in and buy up stock using offshore vehicles at dirt cheap prices just like in the cowboy days in China.

To discount global examples of currency devaluation while providing examples of "The West/GS/Buffet" while stating that Russians are brought up as socialists also is illogical to me...

...it doesnt matter about the circumstances, if you have all these financial sanctions there is NO solution short term.

Crypto could have been the solution but currently theyre not setup for it as they were considering to ban it...now regulated it and build some kind of infrastructure around it.

Even then, what about the funds i cant use sat in my bank?

If the IOU idea happened then its not too dissimilar to when Abramovich used to buy up his colleagues stocks cheaply at payday until he accumulated a large amount of stock...which got him started.

The Oligarchs could simply do the same and the mafia wheel keeps turning.

Im amazed at the viewpoint that this is "small". Cut off the central banks reserves, cut off trade and FX capability and there is no way this is "small".

Yarrgh said:
True, but it's always the ordinary person who suffers.

Having said that, cutting off swift should have been done as soon as one soldier put a toe inside Ukraine and it would be in place now and its effects already felt.

No idea how this resolves itself now. Russia needs a way out with a way back into normal relations without acrimony that festers and makes this situation occur again. So far I can only think of a coup and a bullet in Putin's forehead by Russian hand as the way out.
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Yes i was amazed they didnt inflict the SWIFT measures within 24 hours along with the airspace bans, FX sanctions, Duma and Federation members offshore asset freezes and also the blacklisting of all Russian companies and individuals who are non-resident outside of Russia.

The gravity of such sanctions would surely have driven public opinion in Putin down to the abyss.

Also im not sure why theres been no private mercenaries sent over (at least not to my knowledge).
 
DualityNSNO said:
Hasn't retreated as per Ukraine news sources apparently, but has been slowed down and the sirens in Kiev haven't sounded in several hours.

They have a regime currently where only police, army, emergency services and armed volunteers are allowed on the streets. Everyone who doesn't abide by this will be considered a "Russian sympathiser or spy", which has halted the Kiev evacuation (as well as elsewhere).
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Where do people get food I wonder?

My Kyivan friend hasn't been online for some time : (
 
Kev The Rat said:
As some of you have probably guessed I have connections in Russia, not all of whom support the war and I’ve been told that the situation is very extreme there, Putin retains full control and the idea that it’s moving towards a near term change is implausible.

It’s now akin to North Korea in terms of freedom of speech/association.

One of the main reasons that the Soviet Union collapsed was economic - while sanctions may bite it will take years to bring Russia to its knees - we may even end up taking ourselves down with it.
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It may be 'similar' in that both Nkorea and Russian leaders want to ban freedom of speech etc.

But in terms of sanctions they are nothing alike.

Close off the outside world to Nkorea (apart from China etc) and they are still in their bubble.

Do the same to Russians and its a different ball game.
 
tsubaki said:
a nice read, though he gets his account of Soviet - German cooperation badly wrong (it predates Stalin taking over by several years; Guderian didn't learn to use tanks in Kazan; the Soviets didn't train the Wehrmacht)
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yes was going to qualify that and a few other things in the post, but assumed someone on GOT would be able to verify this either way!
 
Zatara said:
It may be 'similar' in that both Nkorea and Russian leaders want to ban freedom of speech etc.

But in terms of sanctions they are nothing alike.

Close off the outside world to Nkorea (apart from China etc) and they are still in their bubble.

Do the same to Russians and its a different ball game.
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and how long will that take to bite?

and the idea we wont get hit as well.....
 
Spadge Vernacular said:
Zelensky is deffo wrecking Putin's head.
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He thought he would have had a quicker surrender. He probably doesnt want to destroy the infrastructure of the country either.

He was wrong, although he still seems to be ready for talks, which will never be accepted.

God help the people of Ukraine, if he decides to show his actual military hand via artillery and troops.

I wish there was an easy way out.
 
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