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Putin Economic Adviser Warns Russia Will Sell U.S. Bonds And “Crash” Financial System

GoldCore's picture




 

Today’s AM fix was USD 1,339.50, EUR 973.90 and GBP 802.87 per ounce.                                                  

Yesterday’s AM fix was USD 1,344.25, EUR 975.58 and GBP 803.50 per ounce.     


Gold climbed $26.80 or 2.02% yesterday to $1,351.40/oz. Silver rose $0.26 or 1.23% at $21.43/oz
.



U.S. Dollar Index, 1968-March 4, 2014 - (Bloomberg)

Gold dropped 0.8% today as equities bounced higher after reports that Russian President Vladimir

Putin had ordered troops engaged in exercises in an area which borders Ukraine to return to their base.

Gold rallied to a four-month high yesterday after investors sold risk assets following Russia's military intervention, which prompted the United States to look at a series of economic and diplomatic sanctions to isolate Moscow.


As ever, it is always difficult to be prescriptive and pinpoint price movements on specific events. It is arguable, that gold could have risen over 1.5% yesterday even if events in Ukraine were not leading to a deterioration in relations between Russia and the West.


This is because gold still has strong fundamentals which is leading to robust global demand - especially from China.

However, the situation in the Ukraine is potentially one of the greatest geopolitical risks since the end of the Cold War.

A senior adviser to Putin said this morning that if the United States were to impose sanctions on Russia over Ukraine, Moscow might be forced to drop the dollar as a reserve currency and refuse to pay off loans to U.S. banks.

As newswires reported the comments from Putin’s senior aide Glazyev, the USD Index fell marginally to session lows and broke below 80.00 before recovering.

Russia could reduce to zero its economic dependency on the United States if Washington agreed sanctions against Moscow over Ukraine, politician and economist Glazyev said, warning that the American financial system faced a "crash" if this happened.

Sergei Glazyev, a senior adviser to President Putin, added that if Washington froze the accounts of Russian businesses and individuals, Moscow will recommend to all holders of U.S. treasuries to sell their U.S. government debt.

Glazyev is often used by the authorities to stake out a hardline stance. He does not make policy but has the ear of Putin and would be aligned with the more hawkish elements in the Russian government and military.

 

"We would find a way not just to reduce our dependency on the United States to zero but to emerge from those sanctions with great benefits for ourselves," said Kremlin economic aide Sergei Glazyev.

He told the RIA Novosti news agency Russia could stop using dollars for international transactions and create its own payment system using its "wonderful trade and economic relations with our partners in the East and South."

Russian firms and banks would also not return loans from American financial institutions, he said.

"An attempt to announce sanctions would end in a crash for the financial system of the United States, which would cause the end of the domination of the United States in the global financial system,” he added.

Late Monday, U.S. President Barack Obama said the U.S. plans to impose penalties on Russia unless it withdraws its military forces, and on Tuesday, Russia reportedly called troops on military exercises back to their bases.

Glasyev’s comments were likely sanctioned by the Kremlin and by Putin himself. They would appear to be a warning to the U.S. regarding isolating Russia politically and imposing economic sanctions.

If diplomacy does not prevail, then trade wars and currency wars will ensue with attendant consequences for the already vulnerable financial system and global economy.


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Wed, 03/05/2014 - 11:20 | 4511653 RMolineaux
RMolineaux's picture

Given the obvious program by the US to encircle and weaken Russia in any way possible, the next step in the program will be to isolate and close down the Russian Black Sea base at Sevastopol.  It is therefore quite probable that Russia will not relinquish its control of the Crimea in any temporary reduction of tension in the region.  Who can blame them?

Wed, 03/05/2014 - 11:16 | 4511636 PatientZero
PatientZero's picture

If the Lord God YHWH loves humanity, He will let Putin bitch-slap us back into reality.

Wed, 03/05/2014 - 10:26 | 4511352 DOT
DOT's picture

This game has already been played. Russia will continue to make noise and appear to be aggressive while allowing the US and EZ to solidify economic ties with Ukraine. Russia will concede (lose) on a minor point and the west will declare a major diplomatic victory (win). Euros and Dollars will pour in to bolster the "new democracy" (West loses) and Ukraine will pay it's debt to Russia (Russia wins).

Russia will maintain its military hegemony in the Black Sea (Russia wins) and the Western Financial Houses maintain their hegemony through-out the world (Banks win big)

Wed, 03/05/2014 - 10:05 | 4511278 RaceToTheBottom
RaceToTheBottom's picture

When in a pissing contest, it really makes a difference which way the wind is blowing....

Wed, 03/05/2014 - 10:01 | 4511261 Kina
Kina's picture

So assuming the Russians dump their bonds will it actually have an effect as the FED is the buyer of last resort and will scoop them up to stabilize the market.....they could really do it via the TBTF banks and no one would know who stepped in. Seems like Russia is threatening to use a gun with blanks....

 

No they shouldn't just dump the stuff.....they should use it all to buy gold and silver.....in a short space of time. Spike gold and silver to a new level....revalues their current holdings to boot. Would be a nice and extremely painful short squeeze.... and usually when this stuff goes on it builds momentum and others jump in....say China.

 

TPTB can print all they like ... if say China, Russia start dumping then that extra printing is going is gonna make the USD look even more risky... it can become an avalanche....and into gold.

 

 

History tells us that nobody remotely believes this type of shit can go down....until it does.

Wed, 03/05/2014 - 16:11 | 4513159 MeelionDollerBogus
MeelionDollerBogus's picture

No, that would drive down the price of bonds, driving up yields, until the Fed steps in, which would first broil markets then threaten hyperinflation as they're not sure how much printing would be needed to boost price levels, dropping  yields.
Confidence would be shaken so much more purchasing may be needed to satisfy markets.
If the US debt is 100% owned by the Fed the US will collapse. Russia does have allies & they too will sell. Others holding US bonds will have an incentive to sell them too, causing a chain reaction. Even if it's only to re-buy at a lower price it's still an incentive.

Wed, 03/05/2014 - 09:47 | 4511234 JPMorgan
JPMorgan's picture

A ballistic missile test... no problem, but dumping our useless fucking junk bonds! you better watch your back we will come looking for you p u n k.

Wed, 03/05/2014 - 09:41 | 4511217 pndr4495
pndr4495's picture

Say the Rooskies do this - say further that they convince others it would be wise to do the same thing - if I were a buyer , and in this new HFT world , why would I bid more than .0000000000000000000000000000001 for this supposed risk free paper ?

Wed, 03/05/2014 - 09:39 | 4511205 Pol Pot
Pol Pot's picture

So assuming the Russians dump their bonds will it actually have an effect as the FED is the buyer of last resort and will scoop them up to stabilize the market.....they could really do it via the TBTF banks and no one would know who stepped in. Seems like Russia is threatening to use a gun with blanks....

Now switching out of USD for all trade is a bigger stick to wield, but they already do this to some extent, and I do not think their trade is big enough to have a significant impact. It seems to me if Russia wants to inflict financial pain it would be best to demand physical gold for gas and oil from the EU. As there is very limited physical the gold market would spike and that would have the effect of collapsing the USD.

Wed, 03/05/2014 - 09:34 | 4511196 rsnoble
rsnoble's picture

If you're all short and this does happen good luck.  Don't forget to hold some physical assets.  By the time the house sorts it out, if we aren't in nuclear war, you'll be lucky to get your original balance back.

Wed, 03/05/2014 - 07:42 | 4511018 No Euros please...
No Euros please we're British's picture

Over here the BBC reporters in the Ukraine might be sleepwalking but looks like Channel 4 get it.

http://www.channel4.com/news/svoboda-ministers-ukraine-new-government-fa...

Wed, 03/05/2014 - 07:36 | 4511012 fijisailor
fijisailor's picture

Russian oligarchs are still greedy people  but they are not corporate persons with no responsibility.

Wed, 03/05/2014 - 07:28 | 4511007 Fred123
Fred123's picture

Go ahead, sell your bonds you nitwit. 200 billion? Pocket change. Throw in China also, who effing cares?

Wed, 03/05/2014 - 07:16 | 4510991 ThisIsBob
ThisIsBob's picture

So how much is that in yuan?

Wed, 03/05/2014 - 06:08 | 4510944 Kina
Kina's picture

[The USD FIAT, aka AIPAC FED-RESERVE ponzi 'money' can be printed to infinity, for every T-bill, T-note that CHINA/RUSSIA sell the FED will have a strawman BUY.]

 

Once you start an avalanche...you cannot print quick enough...and the hightended printing itself adds to the power of the avalanche ......gold and silver.. would become the immediate goto in such a scenario.....and you wont catch it.

Wed, 03/05/2014 - 06:05 | 4510935 Kina
Kina's picture

The US wont invade the Ukraine. Russia turns off the Gas to Europe...and there will be a moaning and ngashing of teeth as Germany sinks beneath the waves with half its energy gone.

 

Russia would crack Europe open in such a scenario as those over dependendt states devolve to chaos with lack of energy.... Europe would stop supporting the US in such scenario and tell to STFU and piss off.

Wed, 03/05/2014 - 05:24 | 4510913 zionhead101
zionhead101's picture

The entire world is held hostage by a homocidal maniac called NEOCON/LIKUD/ZIOCON, and nobody can fight back, for fear of having their debt go unpaid, but the greatest debtor nation in world history.

The USA has everyone by the balls,

The USA will continue to kill russians and chinese as it pleases, hoping for a 'response'.

Beyond fucking insanity.

Wed, 03/05/2014 - 05:22 | 4510910 zionhead101
zionhead101's picture

Most like two scenarios are ..

1.) USA invades UKRAINE with LURCH/HILLARY $5 billion and RUSSIA reacts stupid...

2.) USA/CIA have chinese taleban kill innoncents and the CHINESE do something stupid

Once the Russia/CHINESE counter-attack, then by war-power the USA NULL&VOIDS all debt with said nations...

 

Called RESET, something british MI6 have been advising the CIA to do for years.

Wed, 03/05/2014 - 09:30 | 4511184 rsnoble
rsnoble's picture

Yeah reset for everyone but the US citizens who will be in makeshift bomb shelters with Mastercard debt collectors on the outside in full riot and nuke gear knocking on the door.

Wed, 03/05/2014 - 05:20 | 4510907 zionhead101
zionhead101's picture

The USD FIAT, aka AIPAC FED-RESERVE ponzi 'money' can be printed to infinity, for every T-bill, T-note that CHINA/RUSSIA sell the FED will have a strawman BUY.

Been this way since 1970's.

 

Wed, 03/05/2014 - 04:29 | 4510870 Kina
Kina's picture

Russia and China would cause much more trouble for TPTB if they turned off the gas and simulaneously bought billions $ gold and silver with USD, pushing the bullion prices up sky high.

 

See Europe and bullion banks shit themselves....and the USD look a bit wobbly

Wed, 03/05/2014 - 03:50 | 4510841 buttmint
buttmint's picture

Gentlemen & Ladies...homework assignment is at hand, sorry to state.

Reading assignment, book report due on Monday:

http://www.amazon.com/Bloodlands-Europe-Between-Hitler-Stalin/dp/0465031471/ref=sr_1_1?s=books&ie=UTF8&qid=1394005693&sr=1-1&keywords=Bloodlands

Wed, 03/05/2014 - 02:42 | 4510763 GoldIsMoney
GoldIsMoney's picture

I doubt it very much. But, I hope I will be wrong....

Wed, 03/05/2014 - 02:18 | 4510738 Global Observer
Global Observer's picture

Selling US treasuries won't cause a crash. It might push the yields up, but the Fed will step in to increase the QE amount and keep the yields down. Those holding the US treasuries will end up holding US$. Makes no difference to the US.

Only a drop in the value of US$ can cause a financial crash in the US. For that to happen, there must be a competing international currency against which the US$ starts losing its value rapidly causing all foreign holders of US$ to rush to this currency. At the moment there is no such currency to which Russia can convert its US$ holdings to. All possible competitors like the Euro, GBP, Yen, Swiss Franc and Canadian $ are tied to the US$ through the currency swap arrangements. For example if Russia tried to convert her US$ holdings to Japanese Yen, Bank of Japan will simply generate the Yen equivalent in value to the US$ Russia is selling. JPY may strengthen slightly against the US$, but not significantly enough to generate a panic out of the US$ and into JPY.

The threat can be real only if a new international currency outside US influence comes into existence and can gain the confidence of at least the non-Western world. I think the BRICS bank and a new currency issued by it will be that currency. While neither Russia nor China can inspire such a confidence internationally for their domestic currencies, a currency issued exclusively for international trade and outside the exclusive control of any of the member countries will inspire more international confidence than even the Euro which while outside the control of any single member country, is still a regional currency. If Russia and China commit themselves to conduct their international trade exclusively in that currency and the bank itself agree to exchange non-member currencies held by non-members at a floating rate, the US$ will drop in value like a rock against this currency. Since the other Western currencies tied themselves to the US$, they will see a fall in the value of their own currencies againnt this new currency, which can lead a collapse of the currency engagement between the different Western currencies and even a steeper fall in the US$.

That is how the US financial system can be crashed and probably will be.

Wed, 03/05/2014 - 07:04 | 4510981 fijisailor
fijisailor's picture

The alternative currency is not a currency.  It is real money.  It is gold and silver.  China and India are already rushing into it.  I don't know about Russians.  Americans are clueless and losing out on the greatest wealth transfer of all time.

Wed, 03/05/2014 - 07:40 | 4511017 Global Observer
Global Observer's picture

It is going to be a fiat currency backed by the export potential of China and Russia. There is no reason for either of them to declare they will conduct their external trade in gold, since most of the gold above the ground is still held by Western Central Banks.

Wed, 03/05/2014 - 10:06 | 4511281 fijisailor
fijisailor's picture

Wrong.  Most of the above ground gold is held in private hands.  Out of 177,000 tons worldwide only about 30,000 tons are held by central banks.    The rest is in private hands and most of the new mining production is ending up in private hands.

http://fofoa.blogspot.ru/

http://www.ingoldwetrust.ch/chinese-physical-gold-demand-ytd-up-51

Sure fiat will always exist but gold will be revalued to its proper position as money for the purchase of oil and other commodities.

Thu, 03/06/2014 - 04:45 | 4515799 Global Observer
Global Observer's picture

I am no expert on gold, but http://en.wikipedia.org/wiki/Gold_reserve states that 52% of gold is in jewellery form, 18% held by Central Banks, 16% as investment (bars and coins), 12% industrial use and 2% unaccounted. Those buying gold jewellery and using gold in industry treat gold as a commodity and would not like to see the price of gold go up in fiat currency terms.

Of the gold held by Central Banks and investors a huge percentage is held by the Western Central Banks and Westerners. If Russia and China can convert all their foreign currency holdings into gold at the current prices of gold, they may be inclined to use gold to settle foreign trade in future. But that is not going to happen. If they announce that here after they will conduct their foreign trade in gold, they instantly trash the value of their forex holdings, by pushing gold prices up through the ceiling while aso increasing the purchasing power of Western countries and Westerners on the international markets. They have to be utter idiots to do that and I don't think they are idiots.

In addition, settlement in physical gold is a cumbersome process for international trade. An electronically transferable fiat between Central Banks is much more preferable to gold as long as the fiat can be trusted to hold value. Net savers (export surplus countries) like China and Russia serve their own interests by holding the value of the new fiat currency in international trade.

Wed, 03/05/2014 - 10:46 | 4511437 astoriajoe
astoriajoe's picture

wait a second...

I heard there is 180,000 tons of gold on deposit in a bank Hawaii.

This nice lady sitting at a food court near the Miami airport told me so on a youtube video. She was very enthusiastic about this.

Wed, 03/05/2014 - 11:00 | 4511528 fijisailor
fijisailor's picture

Yeah.  She's an idiot.

Wed, 03/05/2014 - 02:59 | 4510786 daedon
daedon's picture

"Those with treasuries will end up holding dollars" and what happens to the price of $omething in the real world when there is an over supply ?

Wed, 03/05/2014 - 08:14 | 4511057 Global Observer
Global Observer's picture

Unless the holders of the excess supply expect a loss of value for what they are holding, they simply hoard it. This is how you see individuals and companies with large cash balances. Foreign holders of large US$ assets, like China and Russia, are caught between a rock and a hard place. They do not want to precipitate a dollar devaluation while still holding large amounts of it and at the same time they know that the value of their holdings can be devalued by the US government (by deficit spending) or banking system (by easing credit) by increasing the supply of US$ available to common folks in the US.

However, if they can protect the value of their savings by moving it to another currency and still retain control, although indirectly, over the US$ formerly held by them, they can precipitate a crash in the value of the US$. Once the BRICS bank buys all the Russian and Chinese FX holdings at a fixed exchange rate, any drop in the value of the US$ relative to the new currency will not result in a loss of value for the savings, now denominated in the new currency, of China and Russia.

Wed, 03/05/2014 - 10:49 | 4511449 strangewalk
strangewalk's picture

The new currency scenario outlined by Global Observer would be preempted by a major trade war and/or a real war long before it could materialize, which Russia and China both would realize they could not win. Also, please explain how the US and Europe would pay for China's exports (most of which are produced in US/European factories in China) using this new currency, or how Europe would pay for Russia's energy exports with it? 

Thu, 03/06/2014 - 03:23 | 4515702 Global Observer
Global Observer's picture

If a war breaks out, it will be a war of annihilation, not winners and losers. I don't think the Western countries are ready to be annihilated in order to prevent Russia and China using a currency of their choice for international trade. Moreover, I don't think the movers and shakers in the West are actually opposed to this and suspect they want it to happen.

This new currency will be available for exchange against now popular Western currencies on a floating rate as well as gold at a fixed rate (there won't be any promise to sell gold at a fixed rate, different from a gold standard, only buy gold at a fixed rate). That will push up the prices of imports from China and Russia in terms of Western currencies, whose value has to drop dramatically against the BRICS currency in order to account for the trade gap of the West with Russia and China. In order to defend the value of their currencies Western countries will have to buy the new currency using their gold reserves, transferring gold to the BRICS bank to pay for their imports from Russia and China. As the gold starts getting depleted, they will have to suspend that and impose capital controls and perhaps even go to the BRICS bank for loans to meet the trade gap. As the Western currencies start falling in value, other net exporters will rush to this new currency to protect the value of their savings. The Middle East oil exporters may continue to accept Western currencies as payment, will also accept the BRICS currency as payment (the Yuan and Rouble are already accepted as payments for ME oil) and will instantly convert excess Western currencies to the BRICS currency in order to preserve the value. Effectively, this new currency would become the world's reserve currency.

Western countries who are net importers will go through a very high inflation started by the high prices of goods imported from the BRICS countries. The currency engagement between difeerent Western currencies will fail with each currency attempting a competitive devaluation against the BRICS currency to gain export edge. The Euro experiment will collapse with the few net exporters like Germany opposed to devaluation of the currency and the rest desperate to devalue to reduce the trade gap.

While it may look like an initiative by the BRICS countries, I believe the Western elite are very much behind this and taking steps to give an excuse for the launch of this new international monetary system. The high consumption levels in the West are no longer in the interests of the Western elite. As long as the current international monetary system is in place, it is impossible to avoid high consumption levels in the West. The only way to bring about a new international monetary system without the elite being accused of deliberately sabotaging the interests of the population is to make it look like it was an unintended and unpredictable consequence of a well-intended move, like punishing Russia for its military adventures in Ukraine.

Wed, 03/05/2014 - 00:31 | 4510546 silverserfer
silverserfer's picture

NO Prob, Ireland will buy them up! The FED always had some mysteroius  random henchman central bank ready to soak up the bond dumps.

Wed, 03/05/2014 - 02:10 | 4510726 EastCoast90
EastCoast90's picture

Yeah and if they go bust and the Fed can't find a buyer we can always set up a dummy potempkin central bank.  

Wed, 03/05/2014 - 02:19 | 4510739 Unpopular Truth
Unpopular Truth's picture

didn't we buy some through Belgium in mid-February?

Wed, 03/19/2014 - 23:05 | 4570795 EastCoast90
EastCoast90's picture

Maybe so who knows.

Wed, 03/05/2014 - 00:29 | 4510538 the grateful un...
the grateful unemployed's picture

technically i think Russia could repartiot those bonds, but then if you are not going to honor your debt to US banks who is listening? once before while Paulson was at UST China threatened to dump their bonds, and Ben quietly printed a trillion in hard cold cash just in case. sure its inflationary, but whats that Ben is trying to accomplish? once you make a deal with the US devil there is no quick or easy way out. China had a lot more leverage, but apparently decided against it. although Russia has almost no trade with the US. the sticking point would the gas connection to Europe. imagine PUTIN putting all his bonds on the market, and France, Germany, England ready to buy (where do they get the money? one big federal reserve guess)

Wed, 03/05/2014 - 00:18 | 4510502 Element
Element's picture

Frankly, the idea that Obama imagines he can financially threaten Russia like that and just walk away again, unscathed, smacks of delusion on a cosmological scale. It's a declaration of war on a country that can still totally annihilate the USSA.

Wed, 03/05/2014 - 03:10 | 4510801 Tall Tom
Tall Tom's picture

He is a narcissistic psychopath.

 

Oh...which one?

 

Both Pukin and Obama fit that description.

Wed, 03/05/2014 - 00:09 | 4510485 icanhasbailout
icanhasbailout's picture

I know an easier way to crash the US financial system: wait.

Wed, 03/05/2014 - 00:08 | 4510482 Quaderratic Probing
Quaderratic Probing's picture

"Moscow will recommend to all holders of U.S. treasuries to sell their U.S. government debt. "

Great plan sell it to whom? At how much loss?

I will take all Russian held US debt for $5.00 that should teach America

Wed, 03/05/2014 - 10:35 | 4511354 RaceToTheBottom
RaceToTheBottom's picture

Just the public act of Russia selling those bonds would give the US Fed the political cover to up the Printing presses again. 

OOOOPPPS sorry, UnTapper

The YELLEN would be so happy, she would offer to have Putin's next baby,

(Just like many of the Putin Mancrush team here at ZH, but that is a different matter...Not that there is anything wrong with that...).

Wed, 03/05/2014 - 10:12 | 4511299 Hephaestus
Hephaestus's picture

What would stop the Russians from just swapping with the Chinese? Then the Chinese could sell it off and use the proceeds to purchase gold and swap back with Russia. This leaves Russia holding gold after the Chinese are seen publicly dumping US paper for hard assets. If the US tries to selectively default it is still a default! Right?

Tue, 03/04/2014 - 23:06 | 4510318 The Old Man
The Old Man's picture

Well if anybody has balls enough to do that then I think Russia does. Dictators, Kings, Rulers? Shit, when the money stops flowing and the resultant inflation sets in there'll be so much chaos for such a long time all over the world that neighborhoods, small towns and sparsely populated counties and parishes will become soveriegn nations unto themselves. If you hate the president of your condo now, wait until somebody comes along who's a gang leader, and tells you what he wants, period! Then and only then will you understand the fear of loss and appreciate how wrong you were for not doing anything about it. It may be what the America above us may want, but not the people who make up America.

Tue, 03/04/2014 - 23:01 | 4510306 marathonman
marathonman's picture

It is strange that I prefer Putin to Obama.

Wed, 03/05/2014 - 03:07 | 4510796 Tall Tom
Tall Tom's picture

It is not strange that I prefer neither Obama nor PUKIN.

 

It is not strange that I understand that there are other alternatives than choosing between two wicked men.

 

It is strange that you prefer one form of wickedness over that of another. It is strange that you do not reject both of them with contempt and disgust.

 

I agree. It is strange that you choose not good but evil.

 

Why is that?

Fri, 03/07/2014 - 11:51 | 4521287 marathonman
marathonman's picture

Tom, I fully understand that Putin is a corrupt kleptocrat.  I get that.  I wouldn't prefer him here either.  But in a way Putin is an honest thief.  You know he's going to get his. 

Obama on the other hand is a cloaked thief working undercover to deliver the wealth to his benefactors.  He's been a complete corruption his whole contrived and parasitic existance.

I didn't choose either one of these bastards, but as an outsider looking in at things I have no control over, I identify more with Putin than Obama.  That's all. 

Wed, 03/05/2014 - 05:53 | 4510931 Ar-Pharazôn
Ar-Pharazôn's picture

we are waiting to hear your enlightining alternatives

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