More Bad News for Russia

[fathertime]

REPORT
Plunging Oil Prices
Cheaper crude is hammering Russia

The days of $100-a-barrel oil are gone forever. Many analysts believe that oil prices between $30 and $40 per barrel are a real possibility. That level was last seen during the darkest days of the 2008 global financial crisis; now oil traders are placing bets on oil sinking as low as $20 a barrel.

 

That 20 dollars a barrel seems like a wet dream for you JayH...today oil is up 6% to over 48 dollars a barrel, so it would take more than another 50% drop from a low point to get down to 20 a barrel...


Fathertime!   

[fathertime]

It is obvious you are not learning from your history.


More than 70 years ago there was a corporal who found a scapegoat and his people embraced him as their savior. They prospered under this guy but he was not satisfied. He wanted more. After the Anschluss a world leader went to the corporal and appeased him hoping to obtain Peace For Our Time. A year later there was a World War.


A real burdensome consequence.

I have read and watched a lot on the subject of Chamberlain.   I don't think this is going to play out the same though. There are different dynamics at play, and the weapons are so more powerful today...Russia had it's chance to blitzkrieg Ukraine if they REALLY wanted to, but they didn't....I see this as a defensive play by Russia more than anything else...but of course I get the concern of yours and others.....One fact remains, if down the line, Russia made unprovoked plays for other nations in Europe, there will be trouble...but they are likely to get away with this in Ukraine...of course they are paying in many ways but hopefully it doesn't turn into a full scale world war.






Fathertime!   

[Anotherkiwi]

4.08 grivna to 1 Ruble.

Rubbish - it's the other way around.    And now it's 4.10 (and 64.69 RUB to the USD).

[Muzh]

I have read and watched a lot on the subject of Chamberlain.   I don't think this is going to play out the same though. There are different dynamics at play, and the weapons are so more powerful today...Russia had it's chance to blitzkrieg Ukraine if they REALLY wanted to, but they didn't....I see this as a defensive play by Russia more than anything else...but of course I get the concern of yours and others.....One fact remains, if down the line, Russia made unprovoked plays for other nations in Europe, there will be trouble...but they are likely to get away with this in Ukraine...of course they are paying in many ways but hopefully it doesn't turn into a full scale world war.


Fathertime!

Remember that the weapons issue are very similar. At that time, Britain and France thought (erroneously) that Germany had this powerful military capability. They knew they could match Germany's power (again erroneously) and wanted to avoid an attrition war all over again. Had they thrown the gauntlet down, it would have been a different story as Germany was no match for a war at that time. Who knows, maybe the Wehrmacht generals would have Putsch Hitler into oblivion.


Know what I mean, Verne?

[Photo Guy]

Putin and his generals know there would be a huge fight, if rebels try to push further, in a large offensive, in a blatant way. I would guess that Russia/rebels will try to slowly expand, a few feet at a time, with a frozen conflict. As time goes on this will cost Russia. It might be easier for the world to fund the Ukrainian side, while Russia has a more difficult time during their depression.

[Brasscasing]

Remember that the weapons issue are very similar. At that time, Britain and France thought (erroneously) that Germany had this powerful military capability. They knew they could match Germany's power (again erroneously) and wanted to avoid an attrition war all over again. Had they thrown the gauntlet down, it would have been a different story as Germany was no match for a war at that time. Who knows, maybe the Wehrmacht generals would have Putsch Hitler into oblivion.

Coincidently, what happened in 1936 in the Rhineland is being closely paralleled today in Crimea/Ukraine.

Excerpt from a somewhat simplified version of events but still gets the point across...

..."In March 1936, Hitler took what for him was a huge gamble - he ordered that his troops should openly re-enter the Rhineland thus breaking the terms of  Versailles once again. He did order his generals that the military should retreat out of the Rhineland if the French showed the slightest hint of making a military stand against him. This did not occur. Over 32,000 soldiers and armed policemen crossed into the Rhineland

Why didn’t the Allies (Britain and France) do anything about this violation of the Versailles Treaty ?

 France was going through an internal political crisis at the time and there was no political leadership to concentrate against Nazi Germany. Britain generally supported the view that Nazi Germany was only going into her own "backyard" and that this section of  Versailles was not needed to be enforced in the mid-1930’s. It was believed that Germany was behaving in a reasonable and understandable manner.

Therefore, no action was taken against Nazi Germany, despite  Hitler’s later comment that the march into the Rhineland had been the most nerve-racking 48 hours of his life.

 "If France had then marched into the Rhineland, we would have had to withdraw with our tails between our legs." - Hitler

Hitler learned from this episode that he could all but gamble on France not doing anything. The Rhineland affected the French in that a demilitarised Rhineland was created at  Versailles to act as a barrier for the French if the Germans ever got war-like again. It appeared that in 1936 that France was not even willing to fight for this. Therefore,  Hitler concluded that it he turned his attentions to the east of Europe, France would be even less willing to involve herself. From the British point of view, Hitler  concluded that there was room for movement with regards to  Versailles as the media, in some areas, had made it clear that they believed that some of the terms of  Versailles were not appropriate for the 1930’s."...

http://www.historylearningsite.co.uk/Rhineland_1936.htm

How's that for history repeating itself.

Historians have debated whether or not a retreat from the Rhineland would have cost Hitler the Chancellery in 1936 even as he was assuming/consolidating absolute power possibly avoiding WW2 altogether.

Brass

[lordtiberius]

Russia had it's chance to blitzkrieg Ukraine if they REALLY wanted to, but they didn't....

We agree!  Win Win!

if down the line, Russia made unprovoked plays for other nations in Europe, there will be trouble...but they are likely to get away with this in Ukraine...of course they are paying in many ways but hopefully it doesn't turn into a full scale world war.






Fathertime!

Please explain . . . .

[lordtiberius]

Rubbish - it's the other way around.    And now it's 4.10 (and 64.69 RUB to the USD).

http://www.xe.com/currencycharts/?from=UAH&to=RUB&view=10Y

[lordtiberius]

Coincidently, what happened in 1936 in the Rhineland is being closely paralleled today in Crimea/Ukraine.

Excerpt from a somewhat simplified version of events but still gets the point across...

..."In March 1936, Hitler took what for him was a huge gamble - he ordered that his troops should openly re-enter the Rhineland thus breaking the terms of  Versailles once again. He did order his generals that the military should retreat out of the Rhineland if the French showed the slightest hint of making a military stand against him. This did not occur. Over 32,000 soldiers and armed policemen crossed into the Rhineland

Why didn’t the Allies (Britain and France) do anything about this violation of the Versailles Treaty ?

 France was going through an internal political crisis at the time and there was no political leadership to concentrate against Nazi Germany. Britain generally supported the view that Nazi Germany was only going into her own "backyard" and that this section of  Versailles was not needed to be enforced in the mid-1930’s. It was believed that Germany was behaving in a reasonable and understandable manner.

Therefore, no action was taken against Nazi Germany, despite  Hitler’s later comment that the march into the Rhineland had been the most nerve-racking 48 hours of his life.

 "If France had then marched into the Rhineland, we would have had to withdraw with our tails between our legs." - Hitler

Hitler learned from this episode that he could all but gamble on France not doing anything. The Rhineland affected the French in that a demilitarised Rhineland was created at  Versailles to act as a barrier for the French if the Germans ever got war-like again. It appeared that in 1936 that France was not even willing to fight for this. Therefore,  Hitler concluded that it he turned his attentions to the east of Europe, France would be even less willing to involve herself. From the British point of view, Hitler  concluded that there was room for movement with regards to  Versailles as the media, in some areas, had made it clear that they believed that some of the terms of  Versailles were not appropriate for the 1930’s."...

http://www.historylearningsite.co.uk/Rhineland_1936.htm

How's that for history repeating itself.

Historians have debated whether or not a retreat from the Rhineland would have cost Hitler the Chancellery in 1936 even as he was assuming/consolidating absolute power possibly avoiding WW2 altogether.

Brass

France unlike the West suffered catastrophic loss of life 20 years ago.  The West 20 years ago just partied like it was 1999

[fathertime]

We agree!  Win Win!


Please explain . . . .

While you continue to play 'the fool' you can expect no substantive responses from me. 


Fathertime!   

[fathertime]

Remember that the weapons issue are very similar. At that time, Britain and France thought (erroneously) that Germany had this powerful military capability. They knew they could match Germany's power (again erroneously) and wanted to avoid an attrition war all over again. Had they thrown the gauntlet down, it would have been a different story as Germany was no match for a war at that time. Who knows, maybe the Wehrmacht generals would have Putsch Hitler into oblivion.


Know what I mean, Verne?

You bring up a good point, so one question is are we overestimating Russia's strength?  Would Russia have backed down like Hitler says he would have?  Well that ship may have already sailed at this point anyway.  It seems to me that Russia is paying a price for what they have done.  Did Germany pay anything like this after they snagged the Rhineland?  Russia may wind up with parts of Ukraine but does that really make them a stronger nation, given all that seems to be happening?  My primary concern is us *the USA*, and how all of this is going to effect us.  I don't see Russia's actions as something that "The Average American" needs to be TOO worried about.  There really isn't very much farther they can go without having to go into real battle.  Fortifying the parts of Ukraine that are unaffected is what I could get on board with, and basically let the other parts do whatever they are going to do.... both sides get something and we move on...yes I know it smells like appeasement...and I have yet to see a better option.


Fathertime!   

[lordtiberius]

substantive responses from me. 

 

[ML]

4.08 grivna to 1 Ruble.

You are reading the chart backwards.

http://www.google.com/search?q=uah+to+rubles&ie=utf-8&oe=utf-8

1 UAH will get you 4.06 rubles.

Note that 1 USD will get you 15.82 UAH

while 1 USD will get you 64.28 Rubles.

Think of these two, and you will readily understand the relationship that exists between UAH and Ruble.

[fathertime]

Watch it old boy...By the looks of you, you may have O.D'ed on popcorn already! 


Fathertime!   

[lordtiberius]

You are reading the chart backwards.

http://www.google.com/search?q=uah+to+rubles&ie=utf-8&oe=utf-8

1 UAH will get you 4.06 rubles.

Note that 1 USD will get you 15.82 UAH

while 1 USD will get you 64.28 Rubles.

Think of these two, and you will readily understand the relationship that exists between UAH and Ruble.

Thx

[AkMike]

Just think of a ruble as about 1 1/2 cents.. Then consider that they even bother to still make kopecks too. lmao

[sleepycat]

Wow! If you put it that way then the ruble is really worthless.

I would imagine if I was to drop a 100 ruble note I wouldn't even bother bending down to pick it up.
 

[Doll]

Just think of a ruble as about 1 1/2 cents.. Then consider that they even bother to still make kopecks too. lmao

Why? It is Russia's national currency. Doesn't matter how it is related to dollar in terms of making kopecks.

[AkMike]

 Because the ruble isn't worth the cheap paper it's printed on!


What a 'Junk' Rating Would Mean for Russia
By Howard Amos
Jan. 14 2015 20:28
Last edited 20:29


Russian officials and experts warned Wednesday that an expected decision by Standard and Poor's to deprive Russia of its investment-grade credit rating could cost the country up to $30 billion and drain more money from an economy that is already entering recession.

Major credit rating agencies Fitch and Standard and Poor's currently rank Russia one notch above junk.

Standard and Poor's placed Russia on negative credit watch last month and said the country's status would be re-evaluated in mid-January.

A downgrade to junk would mark Russia's return to the investment grade it held until 2004 and could trigger a sell-off by conservative investment funds barred from buying sub-investment grade securities. Analysts also warned the move could spook equity and bond traders.

"It's not worth underestimating the indirect effects on the market," said Konstantin Artyomov, a money manger at Raiffeisen Capital in Moscow, in written comments Wednesday.

$30 Billion of Consequences

If Standard and Poor's withdraw Russia's investment-grade credit rating it could activate clauses in debt agreements causing Russia's repayment deadlines to be brought forward, according to Economic Development Minister Alexei Ulyukayev.

"If Standard and Poor's make a move then there will be material consequences," Ulyukayev told Russian radio station Business FM on Wednesday.

"We can't say exactly what sum, intuitively it's about $20 billion to $30 billion."

Fleeing Money

As investment funds are often governed by rules stipulating they cannot buy into countries without an investment grade, junk status for Russia would lead to investor flight.

"A mass exit of investors from Russian assets is possible," Anna Nesterova, the head of investment company Capital Center, wrote in a commentary for the Russian news agency TASS on Tuesday.

Such an exodus would mean Russian firms, already squeezed by Western sanctions over the Ukraine crisis that restrict access to EU and U.S. capital markets, would need to look for new sources of finance.

Setting a Precedent

While Standard and Poor's said last month that there was a 50 percent chance of Russia's sovereign rating being downgraded to junk within 90 days, other rating agencies have been more cautious.

Fitch downgraded Russia to one notch above junk last week with a negative outlook, meaning a further downgrade is likely. Rating agency Moody's lists Russia two notches above junk.

If two or more rating agencies give Russia junk status then it will trigger the exit of more investment funds and intensify the outflow of capital, according to Dmitry Dudkin, head of fixed income research at UralSib Capital.

"The cheaper oil is, the greater the chance of such a scenario," said Dudkin by telephone. Crude oil has fallen over 60 percent since June highs of $115 a barrel.

Inevitable?

Russian markets, already hit hard by Western sanctions and an approaching recession, have priced in the consequences of further rating downgrades, according to some analysts. But few expect they can be avoided.

"A Standard and Poor's decision to lower Russia's rating is unavoidable given the oil price and difficult situation facing the Russian budget," said Raiffeisen Capital's Artyomov.

Even Ulyukayev was not optimistic when asked Wednesday about the likelihood of a Standard and Poor's downgrade. "The chance is quite high," he said, according to TASS.
http://www.themoscowtimes.com/article/514387.html

[Doll]

Because the ruble isn't worth the cheap paper it's printed on!


 
 
 

Any country has to have a national currency so it is worth printing.
Rubles will always be there, so will kopeks.

[jone]

It is my belief that investors and Bond Traders are already operating as if the Ruble had junk bond status.  Right now the only prudent move, because Russia has not successfully moved to resolve its fiscal crisis, is to dump Rubles.  Which everyone is doing. 

To back up the Ruble, the only thing that the government can do is buy Rubles so the national currency does not wind up in free fall again.

Investors have speculated that the any equity reserves the government claims to have (the 400 billion remaining) is not really there, or is only partially there.  Russia has been unable to prove it has these reserves to the satisfaction of those who would invest in reversing the Ruble's decline.

Russia is evolving into a pariah state with a currency that is insolvent to anyone but Russians.  Even the Eurasian states surrounding Russian now will only accept transactions in Dollars.  Essentially they are saying:  "Your money is no longer good here."

[AkMike]

Any country has to have a national currency so it is worth printing.
Rubles will always be there, so will kopeks.

Then consider the old retired babushka on a fixed income of say... 2000 rubles.

With the ruble failing and Russia's S&P rating being devalued to junk bond status not to mention a serious chance of a full fledged depression. Just think of the junk status of another 3rd world nation, Zimbabwe and their dollar.

 A wheelbarrow full is good for 2 loaves of bread. A 100 trillion note is issued instead of driving a truck full around.

 Russia has this waiting in the wings if they keep it up.

[AC]

Then consider the old retired babushka on a fixed income of say... 2000 rubles.

With the ruble failing and Russia's S&P rating being devalued to junk bond status not to mention a serious chance of a full fledged depression. Just think of the junk status of another 3rd world nation, Zimbabwe and their dollar.

 A wheelbarrow full is good for 2 loaves of bread. A 100 trillion note is issued instead of driving a truck full around.

 Russia has this waiting in the wings if they keep it up.

Germany had the same thing at the end of WWI.  Workers would get a wheelbarrow full of marks and run to the baker and the butcher hoping to get some food before their money lost further value.

[AkMike]

Germany had the same thing at the end of WWI. Workers would get a wheelbarrow full of marks and run to the baker and the butcher hoping to get some food before their money lost further value.

That's provided that the butcher and baker had anything to sell. 

[Doll]

AK, first of all the prices in Russia are NOT rising proportionally to dollar/ruble rate.
Next, like I wrote many times, we had this situation back in 90s and survived.
Russians are survivors, it is on their blood.